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Show me (or perhaps direct deposit) the money

Before I elaborate on the intriguing title to my first ever blog entry, I would like to thank Norm Fisher and his team for the warm welcome to their fine blog.  A big part of my goal in conducting a real estate practice is educating my clients.  My goal will be the same in providing the occasional snippet to the TeamFisher blog.  So, without further delay, a prudent beginning entry is to discuss money (insert joke about lawyer(s) and money here).  Specifically, when I meet with a client to sign documentation with respect to their sale, their number one question is, “When do I get my money?”  Most sellers expect that they will have their sale proceeds on the actual possession date.  However, the typical wait is closer to three to six business days.  Here is the reason why:

In order for a buyer to take possession of their new property, he or she must have signed their mortgage documentation and tendered their total down payment amount to their lawyer by the possession date (in addition to having home insurance in place if the dwelling is a house).  On the seller’s end, their sale documentation must also be fully executed by the possession date.  On that basis, the buyer will be entitled to take possession.  However, just because the mortgage has been signed does not mean that a bank’s mortgage proceeds will automatically be wired by them into the buyer’s lawyer’s trust account.  Rather, before mortgage proceeds can be requisitioned by the buyer’s lawyer (which in turn are then sent over to the seller’s lawyer), two important changes must be made on title to the subject matter property at the Saskatchewan Land Titles Registry:  1)  The seller’s name has to be removed off of title and replaced with the buyer’s name (this is effected by way of the seller’s sale documentation, which will include a properly executed ‘transfer authorization’); and 2) The buyer’s mortgage has to be registered against title (an actual copy of the mortgage signed by the buyer is sent to Land Titles); the lender of the mortgage funds must have a “secured interest” against the buyer’s title to the subject matter property before any money is actually dispersed by that lender to the buyer’s lawyer.  Describing the above is much easier when I am able to reference an actual title with my client, but I hope this makes sense.

About ten years ago, the Saskatchewan Land Titles system had a massive overhaul and converted to an electronic, automated system that, for example, now enables lawyers and the like to scan and email documents to them.  Whereas in the “old” system, Land Titles took weeks to transfer title and register a mortgage against title, they now take on average two to four business days (the actual amount of time varies based on how busy Land Titles is in processing).  As I had explained above, both the buyer and seller must have their respective documentation fully executed by the possession date (this is explicitly stated in the standard form Offer to Purchase that realtors use).  The usual practice is for the seller and buyer to go to see their lawyer(s) two or three days prior to the possession date (Why so late?  The buyer’s lawyer often does not have what he or she needs from the buyer’s bank to prepare the actual mortgage until two or three days prior to the possession date while on the seller’s end, it is simply the normal time frame and a function of narrow time lines.)  So, let’s say it is two days prior to the possession date and the buyer’s mortgage and seller’s transfer authorization have been signed.  Documents will then be submitted to Land Titles for registration and changes to be made on title.  If, for example, Land Titles is running at four business days to register changes at the time the documents are submitted, we will run into a situation where the buyer will take possession but the actual mortgage funds are not yet in place.  I know it seems odd that someone can move into a house without it, in effect, being paid for.  However, this potentially concerning concept is underscored by the importance of the mortgage documentation having to be signed by the buyer (because we know that once the mortgage documentation has been signed, the mortgage money is coming, simply delayed, pending registration) and lawyers operating on trust conditions (another blog entry for another day).

Once the buyer’s lawyer has confirmation that changes have been made on title to the subject matter property (an automatic notice is sent by Land Titles to the buyer’s lawyer), mortgage funds are then requisitioned (it takes a day or two to actually receive the mortgage funds following requisition – some banks are quicker than others!) and forwarded to the seller’s lawyer for dispersal, which includes paying out the seller’s mortgage (if applicable), paying real estate commissions and legal fees and then finally sending the sale proceeds to the seller.  The seller’s lawyer will usually ask the seller to bring a void cheque to their meeting, since direct deposit of your sale proceeds is the quickest and most efficient way to get your money!

This is the basic explanation as to why a seller usually does not have his or her sale money until after the possession date.  I appreciate any comments or questions that readers may have!

Mike Derbowka
Cuelenaere and Company