What Happens on Closing Day? A Step-by-Step Guide for Ontario Home Buyers and Sellers
Closing day is one of the most exciting parts of a real estate transaction. For buyers, it is the day they officially become the owners of their new property. For sellers, it is the day ownership is transferred and the sale proceeds are finalized.
However, closing day can also feel stressful when clients are unsure about what is happening behind the scenes. Unlike signing the Agreement of Purchase and Sale or visiting the property, most of the legal work on closing day is completed electronically by the buyer’s and seller’s lawyers.
This guide explains what generally happens on a residential real estate closing day in Ontario, what buyers and sellers should expect, and when keys and sale proceeds are normally released.
What Is Closing Day?
Closing day is the date stated in the Agreement of Purchase and Sale when legal ownership of the property is transferred from the seller to the buyer.
On this date:
- The buyer’s lawyer receives and sends the required closing funds.
- The seller’s lawyer confirms that the funds have been received.
- The transfer of ownership is electronically registered.
- Any new mortgage is registered against the property.
- Existing mortgages or other obligations are addressed by the seller’s lawyer.
- The buyer receives access to the property.
- The seller becomes entitled to the net sale proceeds.
Ontario’s land registry system maintains the official records of property ownership, mortgages, transfers and other registered interests. Most real estate documents are submitted through Ontario’s electronic land registration system by authorized professionals.
What Buyers Should Do Before Closing Day
A successful closing usually depends on the buyer completing several important steps before the actual closing date.
1. Arrange the Final Closing Funds
Before closing, the buyer’s lawyer will provide the buyer with a statement showing the amount required to complete the transaction.
This amount may include:
- The remaining down payment
- Land transfer tax
- Legal fees and disbursements
- Title insurance
- Registration fees
- Property tax adjustments
- Condominium common expense adjustments
- Other adjustments required under the Agreement of Purchase and Sale
The buyer will normally be instructed to provide the funds by bank draft, certified cheque, wire transfer or another method approved by the law firm. The funds should be delivered by the deadline provided by the lawyer rather than waiting until closing day.
2. Sign the Closing Documents
The buyer must sign the documents required to complete the purchase and, where applicable, the mortgage.
These documents may include:
- The transfer authorization
- Mortgage documents
- Title directions
- Land transfer tax statements
- Acknowledgements and declarations
- The lawyer’s retainer documents
- Documents required by the lender
The exact documents will depend on the transaction, the lender and the type of property being purchased.
3. Arrange Property Insurance
Where the buyer is obtaining a mortgage, the lender will generally require evidence that suitable property insurance will be effective as of the closing date.
The buyer should arrange insurance early and provide the necessary confirmation to the lawyer before closing. A delay in obtaining insurance may affect the lawyer’s ability to satisfy the lender’s funding requirements.
4. Complete the Final Walk-Through
Where permitted by the Agreement of Purchase and Sale, the buyer may conduct a final visit before closing.
During the final walk-through, the buyer should check whether:
- The property is in substantially the same condition as when the agreement was signed.
- The seller has removed their belongings.
- Agreed-upon fixtures remain at the property.
- Agreed repairs have been completed.
- The property will be vacant, if vacant possession is required.
- There is any new or significant damage.
A final walk-through is not a new home inspection. Its main purpose is to confirm that the property remains in the expected condition and that the seller appears ready to provide possession.
Any serious concerns should be reported to the real estate agent and lawyer immediately. Buyers should not wait until after closing to raise a problem discovered during the final visit.
5. Confirm Utility Arrangements
Buyers should contact the appropriate utility and service providers before closing to arrange for accounts to begin on the closing date.
Depending on the property, this may include:
- Electricity
- Gas
- Water
- Internet
- Waste collection
- Rental equipment accounts
- Condominium management
Sellers should also arrange for final meter readings and account cancellations or transfers, where applicable.
What Happens on Closing Day for a Buyer?
The buyer normally does not need to attend the lawyer’s office on closing day if all documents have already been signed and the required funds have been delivered.
The following steps generally take place behind the scenes.
Step 1: The Lawyer Confirms That the Mortgage Funds Have Arrived
If the buyer is using mortgage financing, the lender sends the mortgage advance to the buyer’s lawyer.
Before releasing the mortgage funds, the lender may require the lawyer to confirm that all funding conditions have been satisfied. These conditions can include signed mortgage documents, proof of insurance, identification requirements and confirmation that the buyer has provided the balance of the required funds.
A delay in receiving mortgage instructions or funds can delay the closing. Buyers should therefore avoid making last-minute changes to their financing and should remain available in case their lawyer or lender requires additional information.
Step 2: The Buyer’s Lawyer Reviews the Final Documents
The buyer’s lawyer reviews the closing documents received from the seller’s lawyer.
Depending on the transaction, these may include:
- The deed or transfer
- The statement of adjustments
- A direction regarding the payment of funds
- Undertakings relating to existing mortgages
- Property tax information
- Keys or key-access instructions
- Other documents required under the agreement
The lawyer also confirms that the documents are properly prepared and that the closing requirements have been satisfied.
Step 3: The Buyer’s Lawyer Sends the Closing Funds
The buyer’s lawyer sends the required closing funds to the seller’s lawyer.
The amount is based on the purchase price, deposit, statement of adjustments and any other credits or adjustments that apply to the transaction.
The statement of adjustments may account for expenses that the seller has already paid or amounts that remain outstanding. For example, if the seller paid property taxes covering a period after the closing date, the buyer may be required to reimburse the seller for the buyer’s portion.
Step 4: The Seller’s Lawyer Confirms Receipt of Funds
The seller’s lawyer confirms that the closing funds have been received and reviews whether the buyer has complied with the closing requirements.
Once both law firms are satisfied that the transaction can be completed, the lawyers authorize the electronic registration of the transfer.
Step 5: Ownership Is Registered in the Buyer’s Name
The transfer is electronically registered, making the buyer the registered owner of the property.
If there is a mortgage, the mortgage or charge is also registered against the property. Ontario’s electronic land registration system is used to register transfers, mortgages and other documents affecting title.
Step 6: The Transaction Is Declared Closed
After the required funds have been delivered and the transfer has been registered, the lawyers confirm that the transaction is complete.
At that point:
- The buyer becomes the legal owner.
- The seller is required to provide possession in accordance with the agreement.
- The buyer may receive the keys or access instructions.
- The buyer can generally begin moving into the property.
What Happens on Closing Day for a Seller?
The seller should have signed the closing documents and provided all required information to the lawyer before closing day.
The seller must also comply with the Agreement of Purchase and Sale, including any obligation to provide vacant possession.
Step 1: The Seller Vacates the Property
Unless the agreement states otherwise, the seller must remove their belongings and vacate the property by the time possession is required.
The seller should:
- Remove personal belongings.
- Remove garbage and unwanted items.
- Leave all fixtures and included chattels required by the agreement.
- Leave the property in the condition required by the agreement.
- Provide all agreed keys, remotes and access devices.
- Avoid causing damage while moving out.
The seller should not assume that they can remain in the property until the end of the evening. Possession is governed by the Agreement of Purchase and Sale and the closing arrangements.
Step 2: The Seller’s Lawyer Receives the Closing Funds
The buyer’s lawyer sends the purchase funds to the seller’s lawyer.
The seller’s lawyer verifies the amount received and confirms that the buyer’s closing documents and requirements are in order.
Step 3: The Transfer Is Registered
Once the closing requirements have been satisfied, the transfer is electronically registered in the buyer’s name.
After registration and completion of the closing process, the buyer is entitled to possession according to the agreement.
Step 4: The Seller’s Financial Obligations Are Paid
The seller’s lawyer uses the sale proceeds to pay the amounts that must be addressed as part of the closing.
These may include:
- Existing mortgages
- Secured lines of credit
- Property tax arrears
- Real estate commission
- Legal fees and disbursements
- Condominium-related amounts
- Adjustments in favour of the buyer
- Other debts or registrations that must be discharged
The seller’s lawyer may also be required to hold back funds where an amount cannot yet be confirmed or where a closing issue remains outstanding.
Step 5: The Net Sale Proceeds Are Released
After the required deductions and holdbacks, the remaining net sale proceeds are paid to the seller. Sellers should not make immediate financial commitments based on the assumption that the sale proceeds will be available early on closing day.
How Minhas Lawyers Can Help
A real estate closing involves more than transferring money and handing over keys. Your lawyer must review the agreement, examine title, communicate with the lender, manage trust funds, prepare and review legal documents, complete electronic registrations and help protect your interests throughout the transaction.
At Minhas Lawyers, we assist clients with residential purchases, sales, refinances and other real estate matters throughout Ontario.
Whether you are buying your first home, selling an existing property or completing a more complex transaction, our team can guide you through the closing process and help you understand what to expect.
Contact Minhas Lawyers to discuss your upcoming real estate transaction.
Email: [email protected]
Phone: (905) 671-9244
Serving Mississauga, Brampton, Toronto, the Greater Toronto Area, and clients throughout Ontario.
This article is provided for general informational purposes only and does not constitute legal advice. Real estate transactions vary, and the rights and obligations of the parties depend on the Agreement of Purchase and Sale and the specific circumstances. You should obtain legal advice regarding your particular transaction
