Buying a house is a significant event. In most cases, it’s the single biggest purchase you make. Even if you’ve bought and sold several times, each new sale can be slightly traumatic, and each new purchase thrilling. Surprisingly I still rarely come across clients who surprisingly don’t understand that they have to hire a lawyer to close the deal. 

They call a few days before the closing, explaining they didn’t know they needed a lawyer. That sometimes happens with people who have come from countries where lawyers are not an integral part of the process of buying or selling homes. For those persons, the procedure here is unusual; however, much it makes sense to us here. 

But these cases are rare and call for the lawyer springing into action quickly to make sure the client can close. These extreme cases only go to highlight why lawyers are critical on real estate deals, no matter how much their role gets downplayed. And sometimes it needs reminding.

Related article: Are you able to Stick to the Negotiations when it gets rough?

WHY DO YOU NEED A LAWYER?

First of all, the agreement of purchase and sale is a contract. It sets out the agreement of what each party is expected to do. Parties are expected to live up to their agreements.

How many times have you read and completed a standard Agreement of Purchase and Sale? What the majority of people focus on is the price, the closing date and financing? What are some likely conditions relating to the condition of the house? Aside from that, you probably are not familiar with the rest of the agreement. The agent does not review this with clients. 

Your real estate lawyer is familiar with all aspects of the agreement that most buyers and sellers consider a preprinted, standard form. And they are right. But your lawyer has probably seen hundreds (if not thousands for the hectic ones).

The lawyer might be aware of all the clauses. He/she has experience in the different complications and variety of situations that can arise during the life of the agreement. The life of the agreement is from the time you sign it to the point you close and get the key and can say it’s your house.

While some real estate agents object to having a lawyer review any agreement before it’s signed, the better agents recognize the need for a lawyer’s input and welcome it. It is only to your advantage that the agent and lawyer can work together. 

So what does a real estate lawyer do for you?

GO OVER THE PURCHASE AGREEMENT BEFORE YOU SIGN

Before you sign the agreement, you can go over it with your lawyer to make sure you understand what your signing and it contains what you need. In addition to the standard printed clauses, most agreements have schedules with the clauses tailored for your specific needs. These schedules are an essential part and shouldn’t be lightly passed over. They normally contain:

• a standard condition for financing, time to arrange and get approval or a commitment;
• a standard condition for a home inspection; and
• several other clauses are dealing with miscellaneous items, such as warranties for the condition of appliances, payment of the balance of the purchase price, special requirements you need to close.

A brief conversation with a lawyer helps you identify what other conditions you may need to protect yourself. The condition gets inserted in the agreement for your protection. It ensures that, if you need something done or require a specific need to meet before you are comfortable to close, whatever you need to do is done so you can close.

So, for example, if you have to sell your home before you can buy, if you don’t include this as a condition, you require to close whether you sell or not. By failing to close, you could be liable for damages. Conditions get included, so you have a way to get out of the agreement without penalty. Your lawyer is to discuss if there are any conditions or terms you need. It might be anything not included in the agreement you are about to sign.

That applies whether you are buying or selling. In both cases, you may want conditions or terms included to ensure you can close and don’t find yourself breaking the agreement because of unexpected events that you might have foreseen. 

Even if your agent has covered as far as you think all the conditions you need, it doesn’t hurt to have a lawyer go over it to make sure you understand what the agreement says but that it says what you think it says. It never hurts to have an extra pair of eyes to make sure.

It sometimes happens that an agent doesn’t include necessary conditions. That happens because, in the excitement about buying or selling, you didn’t consider the circumstances which would make the condition necessary. Speaking with a lawyer is the cooling-off period when you can reconsider with a cooler head.

Your consultation with a lawyer raises issues you may not like to think about, but you need to. It is like going over a checklist. If you can comfortably check off all the items, you can be confident about signing the agreement. If there are some boxes you can’t check off, then you can decide if it’s in your interest to make a change or not.  

Before the agreement is signed, you are free to add; once it’s signed, you can only make a change with the other side’s agreement as an amendment to the agreement. If the other side doesn’t agree to the change, then you are expected to live up to the agreement you signed. Changes can happen after you sign, but there’s no guarantee. If you have to make changes through your lawyer, you may add to your legal costs for closing. 

YOUR LAWYER HELPS TO PLAN FOR CLOSING

Then this is in addition to reviewing the agreement. Your lawyer helps explain what you have to do to close. That includes preparing all the steps related to buying: the financing, arranging title, estimating how much you’ll need to close, how to plan for closing, and what you need to do after closing. A lawyer can advise on all aspects of your deal, including financing and insurance.  

More often than not, the agent’s work gets done once the agreement is signed. After that, your primary contact is your lawyer. The lawyer is there to help close the deal and answer whatever questions you have. When something unexpected happens that can affect your ability to close; your lawyer can help to work out a strategy to deal with the problem. 

Related article: UNBUNDLED LEGAL SERVICE – So you don’t want a lawyer?

WHAT ARE THE LEGAL COSTS TO CLOSE A PURCHASE OR SALE?  

Most real estate lawyers take fixed fees for a real estate closing. The fee varies from lawyer to lawyer and will probably also vary depending on the price of the house. You should not expect fees to be the same for a $600,000 home and a $2,000,000 home. Similarly, you should also expect the Land Transfer Tax to be approximately two times more in Toronto than what you would pay for the same priced home out of Toronto.

Feel free to call lawyers and ask for quotes on fees. But you need to make sure when you get a quote to ask if the quote is for everything, including disbursements and HST, or only fees for the lawyer. Every file has disbursements. On a purchase, a lawyer has to do searches to make sure you are getting a marketable title.

The costs for the search is not part of the fees. They are a disbursement and just add-ons. If the lawyer does what’s called off title searches, for example, a letter enquiry to the building and zoning department, the city asks for a service fee to provide the information. If the lawyer has to get a tax bill, there is a service fee for the city. These are disbursements. 

On almost all purchases, lenders require an up to date survey or if one isn’t available title insurance. Since practically, no one has up to date surveys on their homes and given the cost for obtaining a survey, few homeowners have one or get one; your lender requires you to obtain title insurance to insure the legal title as of the date of closing.

Title insurance insures for those items affecting the legal title to the property that would have been covered by a lawyer’s title opinion, except that it also protects against items that a lawyer couldn’t discover even after doing all the reasonable searches he’s expected to do. Title insurance is an additional disbursement.

When asking for a quote, always be sure you distinguish between fees and disbursements. If you want an estimate of the gross price, ask for the estimated gross total, i.e. fees, disbursements and HST. If the lawyer wants to break it down, let him do it. But remember, every transaction has the potential for unforeseen developments. These can affect fees and costs.