You can’t afford to take any unnecessary days off now that you have a house to pay for – we get it. It makes total sense, logistically, to plan your move over a 3-day weekend.
The problem is that it’s a bad idea – one that could cost you time, money, and aggravation. I’m speaking from personal experience, we have made this mistake and it still makes me shiver to think how badly things could have turned out.
What Happens on Closing Day
Behind the scenes, closing day is a flurry of activity, whether or not it is also the actual moving day. Presumably, all the title searches and other due diligence items have been done correctly, and the path is clear to have all the financial details finalized.
First time buyers or others who are not selling a property to fund a purchase will likely have already provided certified funds for a down payment. The mortgage lender forwards funds to the buyer’s lawyer on closing day, so that he or she has the full amount to provide to the seller’s lawyer. In the old days, this required a courier to deliver a physical bank draft. These days, it is all done electronically, most often through the Large Value Transfer System.
The seller’s lawyer can then release the keys to the house, along with the legal documents that transfer ownership to the new owner. The buyer’s lawyer verifies the documents, then registers the deed and the mortgage with the Land Registry Office, pays associated fees and Land Transfer Tax in their behalf (from the funds provided with the down payment), and contacts the buyer to make arrangements to get the keys into their hands.
Play it Safe – Close Monday to Thursday
Ask any real estate law office, and they will likely tell you that Friday is usually their busiest day of the week.
Staff work every day to close multiple deals, and they do a fantastic job getting things done most of the time. However, no matter how much your lawyer wants to work to get a transaction closed on time, the law office is at the mercy of a bank or lender and a government office (Land Registry). The lending department closes when it closes, and the Land Registry Office closes at 5:00 pm sharp.
If, by 5:00 pm, any of the required paperwork and/or money transfers are incomplete, the deal may not close.
It is enough of an inconvenience to have this happen on a weekday, when lawyers can get back at it the next morning at 8:30. But imagine having your deal pushed off on a Friday afternoon. With your old home sold and closed, or your apartment already rented out to new tenants. And nowhere to go with your expensive moving truck loaded to the brim. Till Monday morning.
Now, this doesn’t happen often. However, it’s not unreasonably paranoid to protect yourself from the possibility of something going wrong. There are three major reasons for this:
- Lawyers and their staff are only human. A busy or challenging day can put them behind schedule if they run into unexpected issues or if someone is off sick.
- Automated and electronic systems are not bulletproof and can go down from time to time, tying everyone’s hands until the problems are resolved.
- In rare circumstances, there is a problem between involved parties that cannot be resolved in time to meet the closing deadline. (For example, if the sellers are in the midst of a bitter divorce, delays in Family Court can result in delayed closings.)
The 5:00 pm deadline is unforgiving – what doesn’t happen by then doesn’t happen that day.
Of course, much of this stress can be reduced, even eliminated, by ensuring that closing day is not moving day. Bridge financing is a very attractive option to help with this situation.