By Jeffrey Schwartz ©
February 19, 2013

There are occasions when we are called by a client after they have entered into an Agreement to buy a new home, having sold their current home, with both closings to occur on the same day.

We go through the process of the same-day transactions advising that in the ordinary course, we have to wait for their buyer's lawyer to complete the purchase with us, close and register before we can then proceed to close their purchase. Depending on how early in the day a buyer closes, the vendor who is then also purchasing, waits until the later part of the day.

They have moved out of their current home and have their hourly movers sitting outside their new home unable to move in until we can close that purchase. It's frustrating and stressful, aside from the hourly expense of movers sitting doing nothing. Sometimes in the course of busy closing days (like Fridays and ends of months), buyer's lawyers packages arrive late in the afternoon, sometimes too late to even move files to the next transaction and thereby creating a further level of stress and risk.

Is there an alternative? We believe there is but like any legal transaction, there are always risks. It is about managing the risk and making informed decisions.

Where a party has options to stagger the purchase of their new home and the sale of their existing home, it can relieve a lot of tension and stress. Most of the banks and institutional lenders that provide conventional mortgage lending, have a bridge loan product that allows a seller of their home to obtain funds to close their purchase earlier than the sale. The client thereby gains title and possession of the new home earlier than when they sell. Depending on how much of a gap exists between the purchase and the sale, clients can do renovations, cleaning, painting and move in before the pressure of their buyer needing to move into their home after closing. Additionally, the wait time to move in is your own, when we close your purchase, you have the keys. Your only wait that day is on our receiving your funds and typically your bank's mortgage advance and the bridge loan funds.

There is a cost to this of course. Institutions charge a fee for setting up the bridge loan, interest and a requirement that there is an unconditional sale of your home (the lender wants the comfort of knowing you have a sale and a pretty clear indication that the bridge loan will be repaid). There are a number of requirements including your lawyer providing written confirmations and undertakings that need to be in place in order to secure a bridge loan.

And yes, there are risks. Your buyer has to close as scheduled – if they fail to close, you could end up in a lawsuit with that buyer, having 2 homes to carry (lenders will sometimes require you to sign a mortgage on the bridge loan terms that has to be registered if the sale does not close).

We have found that over the years, clients who take advantage of this ability to stagger their closing dates, usually have less stress and aggravation on their moving dates. While there is a cost, in the end, it may not be appreciably more than that 2-3 hour wait for the keys to your new home and starting a move in at 6:PM with children needing to settle in and get ready for their new home and school, etc. It is not for everyone but you would do well to explore the option.

We would of course welcome the opportunity to further advise you if retained on your transactions.