How Long After Closing Does the Seller Get Paid?
We outline the closing process in Canada and when to expect payment following a real estate transaction.
By Emily Southey | 10 minute read
If you are selling a house in Canada, you’re probably wondering how long after closing you will receive your money. The reality is that it could take up to a week for a home seller to receive the funds. The time it takes ultimately depends on several factors.
Closing Day in Real Estate
Closing day, or the closing date, is the date that final payments on the home are made and the property ownership gets transferred from the seller to the buyer. This day typically involves the seller, the buyer, and their respective realtors. The purpose of closing day is to facilitate the completion of the sale. See what to expect on closing day below.
What to Expect on Closing Day?
On closing day, sellers and buyers both should expect to sign all kinds of paperwork, such as the house deed, the bill of sale, and any settlement or closing statements. To prepare for the signing of these documents, the seller should take care to bring valid photo identification, the keys and security codes to the home, receipts of renovations or repairs made after the home inspection, and any other paperwork your realtor recommends.
Closing day is also when the buyer will make the final payments (for example, the rest of the deposit or down payment). Although final payments are often made on this date, it can still take some time for the funds to be deposited into the seller’s bank account. Further, the seller will not receive all of the proceeds, as some of it will go toward paying off their remaining mortgage, realtor commissions, and closing costs. However, the seller will receive a settlement statement on closing day that outlines the final take-home amount so that they know what to expect.
When Does the Seller Get the Money?
As mentioned, just because the buyer transfers the remaining funds to the seller on closing day doesn’t mean that the seller gets the money on this day. The reality is that several factors can impact when the seller receives the money.
For example, since the payment process involves settling existing debts, like mortgages or realtor commissions, before the seller receives their money, it can take some time. The sale proceeds must first go toward paying any encumbrances on the title, as well as commissions owed to the realtor and any other expenses, such as the amount owing for title insurance. Once these have all been paid, the net proceeds are ready to be released to the seller. However, they can only be released on a business day when the banks are open, so if your closing day takes place on a Friday or during the weekend, or after the banks have closed on a weekday, this can delay payment.
In addition, the payment method you choose can also impact how long it takes to receive your money. Two popular options are by wire transfer or cheque, but some sellers have special requirements like having the funds deposited directly into their bank accounts or going directly toward interim financing they received to support the purchase of their next homes. If you don’t have any special requirements, then you will likely receive your money by cheque or wire transfer. Wire transfers typically take between 24 and 48 hours to process but once processed, should appear in your account within one business day. In contrast, a physical cheque might be available immediately after closing, though it will need to be deposited and cleared.
Lastly, with so many parties involved in the closing process, such as realtors, the title company, real estate attorneys, the buyer, and the seller, delays are not uncommon, which is yet another factor that can impact how long it takes for the seller to receive their money.
How to Prepare for Closing Day
To ensure closing day goes as smoothly as possible and to increase your odds of getting your funds shortly after closing, the experts at Wahi have put together a list of tips on how to prepare for closing day..
“Closing day is also when the buyer will make the final payments (for example, the rest of the deposit or down payment). Although final payments are often made on this date, it can still take some time for the funds to be deposited into the seller’s bank account. “
1. Confirm closing costs
The first step to preparing for closing day is to review your closing costs and ensure you have a concrete understanding of how much money you are expected to pay on closing day. Your realtor and real estate attorney can help you determine how much money you will owe on closing. This amount will encompass everything from mortgage payments to realtor commissions and more.
2. Review the purchase agreement
It’s always a smart idea to review the purchase agreement one more time before closing day. Make sure you are aware of all contract terms and conditions, including what items you may have agreed to leave behind for the buyer (for example, kitchen appliances or fixtures).
3. Schedule the final walk-through with the buyer
No home sale transaction is complete without a final walk-through. Most of the time, the buyer will want to visit the home one last time before closing day. Before the walk-through, you should ensure that your home is cleaned and all conditions have been met (for example, if you agreed to repair a broken HVAC unit in advance of closing day, this should be completed by the walk-through). If there has been any additional damage between the contract and the closing date, you may want to take care of this as well.
4. Meet with your real estate attorney
One final tip to prepare for closing is to meet with your real estate attorney a few days ahead of closing. Your attorney will prepare a settlement statement that outlines how much money you owe before the sale is complete. This will give you an idea of the net proceeds that will be transferred into your account. When meeting with your real estate attorney, you may start the process of signing various documents and paperwork. It is normal for both the seller and buyer to start this process beforehand, especially given that the attorney will need to make sure everything is in order for the title to be transferred on closing day.
We put the real back in real estate.
Join Wahi today and find out how easy it is to get real estate in the GTA.
Closing Day Issues to Avoid
Certain delays in the closing process may be inevitable, but there are usually ways to avoid them. We outline a few of the most common closing day issues below in the hopes that you can avoid any delays in payment.
- Closing at the end of the week: Picking a close date at the end of the week or near a holiday can often delay payment, especially since funds can only be transferred on business days. Further, there are a few things that can go wrong on closing day, such as the buyer’s lender pulling out or the buyer failing to complete their final walk-through. Having a day or two to resolve these problems is best, but this won’t be possible if you choose to close on a Friday (you will likely have to wait until Monday to get anything done). Therefore, we recommend choosing a closing date closer to the beginning or middle of the week and making it as early in the day as possible.
- Forgetting necessary documentation: Forgetting an important document is an easy way to derail or delay your closing. Don’t let this be you by organizing and gathering all necessary documents in advance. If you are not sure what you need to bring, ask your realtor or real estate attorney in advance. Typically, a seller should be prepared to bring photo identification, proof of conditions being met (for example, receipts of repairs made to the home following the home inspection), keys and security codes to the home, and more.
- Failing to set a clear timeline: From the get-go, it’s important to create a clear timeline with your realtor and to ensure that it is communicated to the buyer. The purchase agreement should include a closing day. Work with your realtor to ensure the date works for both you and the buyer. Have your realtor send a reminder email a day or two in advance of the agreed-upon date.
- Not understanding your rights if the closing is delayed due to the buyer: Missing a closing date can have serious consequences in Ontario. If a buyer fails to close escrow on time, it can have major ramifications. For example, the purchase agreement, which stipulates a closing date, is instantly jeopardized and may even be voided. At this point, the seller usually has several options. They could walk away from the sale altogether (and keep the buyer’s earnest money deposit), agree to extend the closing date and charge the buyer a per diem, or even sue the buyer for damages, depending on the situation. Understanding your options for recourse is important. Work with a real estate attorney or realtor to learn more about your rights as a seller if the buyer delays the closing.
Typical Timeline for a Home Sale in Canada
To give sellers a better idea of what to expect when selling a home, we have put together the following timeline. This timeline begins with a buyer’s offer being accepted by the seller and ends with the seller receiving the funds for the home. Please note that this entire process may take as little as one week but can also take up to 30 days.
Day 1: The seller and their realtor accept a buyer’s offer, the seller and buyer sign the purchase agreement, and the seller begins preparing for closing day (which has been stipulated in the purchase agreement).
Day 2: The seller contacts and hires a real estate attorney to assist with the sale of the property.
Day 3: The seller’s realtor sends the necessary documentation and paperwork to the real estate attorney.
Day 4: The real estate attorney receives the paperwork sent by the seller’s realtor and opens a file.
Day 5: The real estate attorney conducts a title search and orders a copy of the property tax statement and mortgage payout statement (this can take between one and seven days depending on where you live).
Day 6: When the statements have been received, the seller meets with the real estate attorney to begin signing the necessary documents.
Day 7 (or later): The real estate attorney sends the title transfer to the buyer’s attorney.
Closing day: The seller and buyer sign all necessary documents to complete the home sale. The seller’s real estate attorney reviews the paperwork and facilitates the payout of the seller’s outstanding debts (for example, outstanding mortgage payments).
The day after closing: Once all debts, realtor commissions, and closing costs (including legal fees) have been paid, the sale proceeds are released to the seller. This process usually takes a minimum of one business day but can be longer depending on the selected payment method and the date the closing takes place.
Frequently Asked Questions
What is the fastest possible date after a closing of a home can a home seller receive payment?
Theoretically, the seller can receive payment on the day of closing, depending on the payment method they choose and the time that the closing takes place. If the closing takes place on a weekday early in the morning, and the funds are transferred via cheque, that might leave you with enough time to receive your money and cash it at the bank on the same day.
Once the funds are in the home seller’s account, when will those funds be available?
The funds from your home sale will typically be available within one business day of the money being transferred. Depending on the chosen payment method, funds can take anywhere from 24 to 48 hours to be processed before they are deposited into the home seller’s account and available to use.
Can you speak with your realtor about a deadline when the funds will be available after closing?
Yes, a seller can certainly speak with a realtor about when they would prefer to receive the proceeds from the home sale after closing. That said, a realtor may not have the power to enforce the desired deadline if other variables come up. In any case, a realtor can explain the closing day process and provide a typical timeline for home sales. If there is a specific day you would like to receive the funds by, your realtor can help you devise a plan to increase your odds of getting paid by this date (for example, they can advise you on when to schedule the closing so that enough time is left to get the funds).