Importance of Your Closing Date in Real Estate

By Puneet Shroff

Choosing the right closing date for a residential real estate transaction in Ontario is a critical, often overlooked, part of the process. The closing date is the day when property ownership officially changes hands, funds are transferred, and keys are exchanged. A well-chosen date can lead to a smooth experience, while a poor choice can result in unexpected stress, costs, and legal issues.

Weekends and Holidays

A fundamental rule is to never schedule a closing on a weekend or a statutory holiday. This is because land registry offices, financial institutions, and most law firms are closed on these days. When a closing is scheduled for the day following a long weekend, all parties involved often face a backlog of transactions and communications from the extended break. This can create unnecessary pressure and delays that might have been easily avoided with more strategic timing.

Best Practice: Choose a mid-week closing date to provide a buffer from weekends and statutory holidays.

Friday Closing

Friday closings are popular because they allow buyers to move in over the weekend. However, they come with significant risks. Ontario’s land registry offices and financial institutions typically close at 5:00 p.m. If a delay occurs—even a small one—the transaction cannot be completed until the next business day, which is usually Monday. This can leave buyers without access to their new home for the entire weekend, requiring last-minute arrangements for accommodation and storage. Additionally, interest charges can become an issue if funds are not transferred on time.

Best Practice: Opt for a Tuesday, Wednesday, or Thursday closing to ensure there is enough time in the business week to resolve any unforeseen issues.

Same-Day Purchase and Sale

Many people attempt to align the closing dates for their sale and subsequent purchase on the same day. While this seems efficient, it introduces a major risk. If the buyer of your current property experiences any delay—such as a problem with mortgage funding or documentation—you may not have the funds needed to complete your purchase. This creates a domino effect: if your buyer can't close, you can't close on your new home. This can cause significant stress for all parties in the transaction chain.

Best Practice: Schedule your sale to close at least one business day before your purchase. While this may require temporary living arrangements, it provides a crucial buffer to prevent more serious complications.

Peak Congestion

The end of the month, particularly the 30th and 31st, is one of the busiest times for real estate professionals, financial institutions, and moving companies in Ontario. This high volume of transactions can lead to slower service and reduced availability of essential resources. Similarly, the beginning of the month (the 1st) and mid-month (around the 15th) are also busy due to rental lease turnovers and mortgage payment schedules.

Best Practice: Aim to schedule your closing during the second or third week of the month, ideally between the 10th and the 20th, when transaction volumes are typically lower.

Your Mortgage Renewal Date

If you are selling a property, it's wise to avoid scheduling the closing date to coincide with your mortgage renewal date. Aligning these dates can create complications related to discharging your existing mortgage and potential prepayment penalties. For example, if your mortgage renewal date is the same date as closing and the buyer cannot close, you will be automatically put into a high-interest renewal with further penalties.

Best Practice: Review your mortgage renewal date and choose a closing date that is sufficiently separate from this milestone. The banks will still waive the penalty if the closing date is a few weeks prior to your renewal date.

Bridge Financing: A Viable Alternative

For those who cannot stagger their purchase and sale closing dates, bridge financing is a valuable option. This short-term loan, available from many financial institutions, provides the capital needed to complete your purchase before you receive the proceeds from your sale. Once your sale closes, a portion of the proceeds is used to pay off the bridge loan. While this option has an associated cost, it can significantly reduce stress and provide greater scheduling flexibility.

Best Practice: Discuss bridge financing with your mortgage provider early in the process to understand the requirements and costs.

Conclusion

While the purchase price often gets the most attention, the strategic choice of a closing date is equally important. In today’s competitive real estate market, being flexible with your closing date can be a powerful negotiation tool. By carefully considering the factors discussed and seeking professional guidance, you can avoid unnecessary complications and ensure a smoother transition to your new home. Working with experienced professionals—including a real estate lawyer, mortgage provider, and realtor—is essential for navigating Ontario’s real estate landscape with confidence.

Please contact Puneet Shroff at pshroff@sorbaralaw.com for your real estate law needs.