Buyer’s Guide to Residential Real Estate in Ontario

By Puneet Shroff

The real estate purchase process in Ontario plays a vital role in ensuring a smooth and legally sound property transaction. This meticulously structured procedure involves a series of essential steps that guarantee transparency and protect the interests of both buyers and sellers. In this guide, we will provide you with a step-by-step walkthrough of the purchase process for buyers—from making an offer on a property to finally receiving the keys to your new home.

 

1. The Offer and Acceptance

The process commences with submitting an offer to purchase by the prospective buyer on the standardized form called the Agreement of Purchase and Sale (OREA Form 100 or Form 101). The offer is accompanied by a monetary Deposit by the buyer (usually 5% to 20% of the purchase price) that is held in trust by the realty brokerage or the seller’s lawyers. Realtors play a crucial role in negotiating the terms of the Agreement of Purchase and Sale. Once negotiations are complete and the seller accepts the offer, the Agreement becomes a legally binding contract subject to the terms and conditions set out within. 

2. Mortgage Financing

Depending on whether the buyer has the available funds to purchase the property, they may have to secure mortgage financing from an institutional or private lender. Prior to making an offer, it is advisable for buyers to secure a mortgage pre-approval from the lender as it enhances the buyer's credibility in the eyes of the seller. In the case of institutional lenders, the lender often retains the same real estate lawyer as the borrower buyer to draft and register the mortgage against the property. Once the offer is accepted, it is important for the buyer to send the Agreement of Purchase and Sale to their lender or mortgage broker.

3. Retaining a Real Estate Lawyer

Real Estate lawyers are not only important but mandatory, and one cannot purchase or sell real estate in Ontario without one. They are the only ones with the authority to register the necessary closing documents with the local Land Registry Office to effect the change of ownership or the placement of a mortgage. The buyer and the seller need to retain their respective real estate lawyers to represent their interests from the outset. The lawyers ensure that the terms of the Agreement of Purchase and Sale are met; they offer advice on complex legal matters affecting the transaction, prepare and review legal documents, assist with negotiations, and conduct thorough title searches.

4. Conditions

Most Agreements of Purchase and Sale include certain conditions that can affect whether the purchase will be completed. These conditions need to be satisfied or waived prior to the completion date. Many buyers opt for a home inspection as a condition to uncover any hidden issues with the property. Perhaps an appraisal may be required by the bank or lender to ensure the property's value aligns with the purchase price. Other conditions can include a review of the condominium documents by the lawyer, the buyer obtaining satisfactory financing, the sale of the buyer’s existing property, obtaining satisfactory insurance coverage for the property, or compliance with zoning and building permits.

5. Title Search and Title Insurance

The buyer's lawyer conducts a title search to verify the seller's ownership of the property and check for any outstanding easements, liens or encumbrances. Depending on the property type and characteristics, certain off-title searches, such as zoning or building permits, may be required. The buyer may acquire title insurance to safeguard against potential title discrepancies; if a mortgage is involved, title insurance will be mandatory but it can reduce your legal bill by replacing certain searches that would otherwise have to be conducted by the lawyer. 

6. Requisitions

Based on the results of the title search, the buyer’s lawyer sends out a letter containing inquiries to the seller’s lawyer, seeking clarification on different aspects of the property; these inquiries are called Requisitions. The Agreement of Purchase and Sale contains a deadline by which such Requisitions need to be sent out by the buyer’s lawyer. Requisitions aim to gather information about the property such as encumbrances, property boundaries, easements, surveys, leases, permits, outstanding taxes or liens. Upon receiving the necessary responses to the inquiries, the buyer’s lawyer requests further clarification or negotiates with the seller’s lawyer resolutions to any issues that cannot be rectified by the seller. 

7. Closing

Closing in real estate transactions in Ontario is a complex process involving various legal, financial, and administrative tasks. It requires attention to detail and coordination between the buyer, seller, lawyers, lenders, and other parties involved. A few days prior to the closing day (the day the transaction is complete), the buyer and seller sign all necessary documents prepared by their respective lawyers either in-person or virtually. These can include the mortgage, transfer of title, and property tax forms. There are various closing costs in addition to the purchase price (less deposit) that are payable by the buyer and include but are not limited to land transfer tax, legal fees and disbursements, proportionate property taxes, and Title Insurance. On the day of Closing, the buyer’s lawyer registers the transfer of ownership and mortgage documents with the local Land Registry Office. The buyer's mortgage lender transfers the funds to the buyer’s lawyer’s trust account, which is then transferred to the seller’s lawyer. At this point, the keys to the property are handed over to the buyer.

8. Post-Closing

Upon completion of the closing process, the buyer assumes responsibility for property taxes and utility accounts. The buyer will receive a detailed reporting letter from their lawyer outlining the purchase. It's important that the buyer check the appliances on the closing day and note any defects to their lawyer. The buyer can enter into a pre-authorized payment plan for their condominium fees, mortgage payments or property taxes. Lastly, it is the buyer’s privilege to decorate the property to their liking to make it into a home.

By working with our office, buyers can finalize their real estate transactions smoothly and with peace of mind. Contact our office for your real estate needs.