In the last few years, the U.S. real estate market has sparked interest in the eyes of Canadian investors. We are not solely talking about major investors, but smaller players looking to purchase a second home to escape those long Canadian winters.
The process of purchasing U.S. real estate can be quite daunting for Canadians. As a result, this text will look at the process of purchasing U.S. real estate and discuss the benefits that legal representation provides to Canadian buyers purchasing property south of the border.
Although we will not discuss the differences between straight sales, foreclosures and short sales, it is important that you are aware of their differences, as they have various implications for the buyer. For more information on these topics, please refer here.
The logical place to start for any Canadian looking to make a U.S. real estate purchase is to find a realtor who can assist in finding the right properties. However, it is important that you choose your realtor wisely. Unfortunately, not all realtors are the same, and there are some who understand the needs of Canadians far better than others. This may not seem overly important, but when a U.S. realtor is looking for a property for a U.S. client, the implications are different than when that client is Canadian. For example, a realtor who understands the needs of Canadians will know to ask the right questions such as, “Will you be renting the property out for half of the year?” or, “Will you be coming down during the holidays with your extended family?” and so on. These questions can save time when you are trying to narrow down the right property for purchase. By knowing the answer to such questions, your realtor will be able to avoid condominiums that prohibit some of these things within their rules and regulations.
However, a great realtor is no replacement for legal representation. Having a lawyer on your side will enable you to have your initial offer to purchase reviewed prior to submission. This will allow you to truly understand the terms and conditions of the contract into which you are entering and ensure that any loose ends and negotiating tactics are taken care of. I have had personal experiences with realtors who failed to read through a purchase contract in detail. They simply filled out the provisions to their liking and asked their client to sign.
I know that there are realtors out there reading this who are taking my comments as a personal attack on their reputations. I would like to emphasize that there are many realtors out there who are very detail-oriented and truly look after the best interests of their clients. If that is you, then my previous statement does not apply to you. However, as in any profession, there are individuals who do not do their job with the high standards one would expect, especially when you are talking about a substantial purchase such as real estate. A lawyer helps to ensure that your contract is drafted with your best interests in mind – not with the sole purpose of closing a deal.
Once your realtor has found the property of your dreams and you have an accepted offer, the countdown to closing begins. This is when the title company takes over. Who is the title company? They are a neutral third party designated in the contract to transfer ownership to the buyer. They are responsible for ensuring that conveyance is done properly by verifying that there have been no defects in the chain of title leading up to your ownership. They will ensure that there are no liens that could force you to lose the property at a later date. They also issue title insurance in case a lien or defect in title was overlooked. Finally, the title company prepares all necessary closing documents to be signed by the buyer and seller.
Once again, it is worthwhile to have legal representation at this point in the purchasing process. A lawyer reviews all the documents prepared by the title company in order to ensure that they have been prepared correctly. This involves reviewing estoppel letters from the condo association, previous county tax bills, the closing statement and conveyance documents to ensure that title is being conveyed to the correct party. The latter is even more important when your purchase is not being made personally, but by an entity set up for the purpose of holding title to the property. In addition, a lawyer will verify the conditions that need to be met in order for the buyer to obtain the title insurance discussed above. In the event that closing takes place and one or more of the conditions for title insurance have not been met, the buyer could be faced with a situation where they are not protected against prior liens or defects in title. This could lead to a partial or total loss of property.
Many people are not aware that, in the U.S., one does not need to be physically present on the day of closing. Buyers can elect for what is called a “mail-away closing”. For these closings, the title company sends all the documents that the buyer needs to sign via mail or e-mail. These documents are then executed here in Canada and sent back to the title company by the day of closing.
Once again, having legal representation can make this process go much more smoothly than it otherwise might. For starters, your lawyer will deal with the title company from start to finish, allowing you to relax and not worry about the hassle of everything discussed above. Your lawyer will guide you through all of the steps leading up to closing and will ultimately allow you to close in their office here in Canada. During your closing, a lawyer can assist even further by discussing the best strategy for payment, allowing for better tax planning down the road.
In light of everything discussed, there is no question that purchasing in the U.S. can seem overwhelming. Having the right support to guide you through the process can make all the difference in the world.