Guest Post from David Simon – Barrister and Solicitor 604-943-4045
This month my newsletter deals with a very common complaint I hear from selling clients. “How come I have to pay an extra day or 2 or 3 days of extra interest on my mortgage because the buyer didn’t get you their money in time for you to pay off my mortgage on the closing date?”
Unfortunately I have to tell them their agents did not do a good job in drafting the agreement of purchase and sale. The standard real estate agreement does not stipulate when the buyer has to deliver the money on the day of closing. So theoretically the buyer can deliver it after the banks close. These means your client has to pay an extra days interest. Considering the size of mortgages today that could mean a couple of hundred dollars.
The way around this is for the agreement to say: “The buyer will make available the closing proceeds to the vendor’s solicitor by 2PM on the day of closing, failing which the buyer will be responsible to the vendor for the vendor’s per diem interest on its mortgage for each day that the buyer is delayed in being able to pay of its mortgage”. With this clause, if the closing is on a Friday and the money is late, then the buyer will have to pay the vendor interest to the next Monday. While some banks are open on Saturday and even Sunday they don’t credit payments until the next business day which is Monday.
Another way to minimize the extra costs is to avoid closings on Fridays, especially before long weekends. No vendor wants to pay extra interest to a bank for those days. Also ask your client who their lender is as some lenders require the discharge funds to be couriered to them in Toronto. The vendor wants to minimize the number of extra days of interest it has to pay.
I remind agents that I offer free telephone consultations for them. If you are not sure about something related to your offer or deal, do not hesitate to call or contact me. I am also available to give talks to your agencies or even at seminars you might hold for clients. I also offer fixed all inclusive fees for transactions. Please call for a quote.