Chapter 7.2: From Contract To Completion

Question 1

When setting up a T sheet, the buyer or purchaser should always be on the _______

Answer 1

Left

Question 2

When setting up a T-sheet, the seller and vendor should always be on the ________

Answer 2

Right!

Question 3

With a tee sheet, _________ appears on the left, __________ appears on the right

Answer 3

Debit

Credit

Question 4

On the buyer / purchaser side, what value always appears at the end

Answer 4

Balance due for purchasers

Balance due is always for buyers

Question 5

On the seller / vendor side, what value always appears at the bottom?

Answer 5

Cash proceeds for vendors

Cash proceeds always goes with the seller

Question 6

__________________: this is the date in which the transaction is done (finished) … the money is transferred to the seller and the land title is transferred to the buyer

Answer 6

Completion date

Question 7

When does the real estate agent get paid?

Answer 7

On the completion date - subject to any tenancy agreement

Question 8

__________________: the day the purchaser GETS THE KEYS; where they get physical access to the property

Answer 8

Possession date

*usually 1 day after completion date

Question 9

______________: the day the lawyers use to tally up the debits and credits to see who needs to pay what to whom to balance out the deal

Answer 9

Adjustment date

Question 10

__________ is the cut-off day for taxes

Answer 10

July 1st

Question 11

You are paying taxes from January 1st to December 31st of the ____________

Answer 11

Current year

Question 12

How many days does July have?

Answer 12

31!!

Question 13

How many days does May have?

Answer 13

31!

Question 14

How many days does February have?

Answer 14

28 days!

Question 15

Example 1: Taxes were previously paid by Vendor (Seller)

The vendor has paid the annual taxes for the property

In this example, they’re gonna pay $1200. The adjustment date is October 23rd

Who is responsible for the taxes?

Answer 15

The seller

As he was in the house on July 1st which is the tax cutoff

Question 16

Example 1: Taxes were previously paid by Vendor (Seller)

The vendor has paid the annual taxes for the property

In this example, they’re gonna pay $1200. The adjustment date is October 23rd

Who owes money to who!

Answer 16

The buyer owes money to the seller

As the seller would have paid taxes given he was in the house for July 1st

Question 17

Example 1: Taxes were previously paid by Vendor (Seller)

The vendor has paid the annual taxes for the property

In this example, they’re gonna pay $1200. The adjustment date is October 23rd

The buyer portion of taxes he owes is what? (Time period)

Answer 17

October 23rd-December 31st

You gotta pay the difference

Question 18

Example 1: Taxes were previously paid by Vendor (Seller)

The vendor has paid the annual taxes for the property

In this example, they’re gonna pay $1200. The adjustment date is October 23rd

Count the days of how many days the buyer will be in the house

Answer 18

October 23rd-December 31st = 70 day

Oct 31 - 23, +1 + Nov 30 + Dec 31 = 70

Question 19

Example 1: Taxes were previously paid by Vendor (Seller)

The vendor has paid the annual taxes for the property

In this example, they’re gonna pay $1200. The adjustment date is October 23rd

Now we know there is 70 days, do the math for the buyers amount he owes

Answer 19

70 / 365 = 0.19178

0.19178 x 1200 = $230.14

Question 20

Example 1: Taxes were previously paid by Vendor (Seller)

The vendor has paid the annual taxes for the property

In this example, they’re gonna pay $1200. The adjustment date is October 23rd

Now we know the buyer owes $230.14, complete the T-sheet

Answer 20

Buyers side
Debit: $230.14

Sellers side:
Credit: $230.14

Question 21

Remember, when trying to figure out who owes who money, look at the _________ cutoff date. Whoever was in the house at that date, pays the bill (which day of the year?)

Answer 21

July 1st

Question 22

Example #2: taxes due but not paid yet

The taxes in the amount of $1095 are due but not yet have been paid. A penalty of $105 is owing. The adjustment date is August 31st

Who is responsible for the taxes?

Answer 22

The seller!

As august 31st is past July 1st

Question 23

Example #2: taxes due but not paid yet

The taxes in the amount of $1095 are due but not yet have been paid. A penalty of $105 is owing. The adjustment date is August 31st

Who owes money to whom?

Answer 23

The buyer owes the seller money

As the seller would have paid the taxes on July 1st cutoff date

Question 24

Example #2: taxes due but not paid yet

The taxes in the amount of $1095 are due but not yet have been paid. A penalty of $105 is owing. The adjustment date is August 31st

Now, calculate what portion of the buyers taxes need to be accounted for

Answer 24

August 31st - December 31st

Question 25

Example #2: taxes due but not paid yet The taxes in the amount of $1095 are due but not yet have been paid. A penalty of $105 is owing. The adjustment date is August 31st Now that we know it’s August 31st to December 31st, count the days

Answer 25

August 31st to December 31st = 123 Aug 31st - 31, +1, + sep 30 + Oct 31 + nov 30 + Dec 31 = 123

Question 26

Example #2: taxes due but not paid yet The taxes in the amount of $1095 are due but not yet have been paid. A penalty of $105 is owing. The adjustment date is August 31st Now that we know it’s 123 days, calculate how much the buyer owes

Answer 26

123 / 365 = 0.33698 0.33698 x $1095 = $369 Buyer is not subject to the penalty as the seller was responsible to pay on time

Question 27

Example #2: taxes due but not paid yet The taxes in the amount of $1095 are due but not yet have been paid. A penalty of $105 is owing. The adjustment date is August 31st Now that we know it’s $369 the buyer owes the seller, set up the T-sheet

Answer 27

Buyer Debit: $369 Seller: Credit: $369 Debit: $105 (late fee buyer doesn’t pay)

Question 28

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Who is responsible for paying the taxes?

Answer 28

The buyer As March 10th is before July 1st

Question 29

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Who owes money to whom?

Answer 29

The seller owes money to the buyer

Question 30

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Find the portion the seller will have to pay (just the dates)

Answer 30

January 1st - March 9th

Question 31

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Now that we know it’s Jan 1st - Mar 9th, how many days is that?

Answer 31

Jan 31 + Feb 28 + Mar 9 = 68 days

Question 32

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Now that we know it’s 68 days, do the math

Answer 32

68 / 365 = 0.18630 0.18630 x $1200 = $223.56

Question 33

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Now that we know it’s $223.56, do the T-sheet

Answer 33

Buyer Credit: $223.56 Seller Debit: $223.56

Question 34

Example #3: Taxes to be paid in the future by purchaser The net taxes are not yet due, but last years taxes were $1,200. The adjustment date is March 10th Where does the full $1200 show up?

Answer 34

The full $1200 never shows up on any one’s statements!’ It will also be proportional to what they owe

Question 35

Property Transfer Tax Calculations have now many tiers?

Answer 35

3 tiers

Question 36

Property Transfer Tax Calculations 3 Tiers

Answer 36

Tier 1: 200,000 @ 1% ($1-$200,000) Tier 2: The next 1.8m @ 2% ($200,001-2,000,000) Tier 3: Over 2m+ @ 3% (2,000,001 - unlimited

Question 37

Property Transfer Tax Calculations Bonus Tier

Answer 37

For residential properties only! Amounts over $3m get charged an additional 2%

Question 38

Reminder, foreigners buyer tax for residential property is what?

Answer 38

PTT + 20% market value

Question 39

Property Transfer Tax Calculations, only calculate this when the question explicitly tells you, and __________________

Answer 39

Debit the buyer

Question 40

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Question: show the T sheet for the sales price

Answer 40

Buyer Debit: 150,000 Seller Credit: 150,000

Question 41

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Question: show the t sheet for the deposit to the brokerage

Answer 41

Buyer Credit 15,000 Seller Nothing as it goes to the brokerage and not the seller

Question 42

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Show the T-sheet for 1st mortgage of 71,000 to be assumed

Answer 42

Buyer Credit: 71,000 Seller Debit: 71,000

Question 43

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Show the t sheet for the 2nd mortgage of 34,000 that has been arranged

Answer 43

Buyer Credit: 34,000 Seller Doesn’t show up! (Doesn’t affect them)

Question 44

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Show the T sheet for the unpaid taxes of 1,095 + penalty of 105

Answer 44

Aug 31st-December 31 = 123 days 123 / 365 = 0.3369 0.3369 x 1095 = 369 Buyer Debit: 369 Seller: Credit 369 Debit: 1095 + 105

Question 45

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Show t sheet for 6% commission of sale price

Answer 45

Sale price = 150,000 Commission = 6% 150,000 x 6% = 9000 Buyer Doesn’t show up! Seller: Debit: 9000

Question 46

Example Question: Price: 150,000 Deposit to brokerage 15,000 Financing -1st mortgage to be assumed 71,000 -2nd mortgage arranged 34,000 Taxes -unpaid and overdue 1,095 -A overdue penalty 105 Commission 6% of sale price Conveyancing Fee 600 Adjustment and completion date = August 31st Assume it is not a leap year Show the tee sheet for the conveyancing fees

Answer 46

*buyer only pays legal fees Buyer: Debit: 600 Seller Doesn’t show up!

Question 47

T Sheet Practice Time! Sale price / house price

Answer 47

Buyer (Purchaser) Debit: xxx Credit: Seller (Vendor) Debit: Credit: xxx

Question 48

T Sheet practice time Real estate commission

Answer 48

Buyer (Purchaser) Debit: Credit: Seller (Vendor) Debit: xxx Credit: *remember, the seller is the only one who pays the commission

Question 49

T sheet practice time Deposit paid to BROKERAGE

Answer 49

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: Credit: *given the money is in the brokerages hand, the seller doesn’t see it!

Question 50

T sheet practice time Deposit paid directly to vendor

Answer 50

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: xxx Credit:

Question 51

T sheet practice time 1st legal mortgage

Answer 51

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: Credit: *mortgages don’t really effect the seller unless they are assumed, vendor take back mortgage, or agreement for sale

Question 52

T sheet practice Equitable mortgage (2nd beyond mortgage)

Answer 52

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: Credit: * doesn’t affect the seller as they aren’t involved in the mortgage

Question 53

T sheet practice Mortgage to be assumed

Answer 53

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: xxx Credit: The seller is involved in this now so they have to be debited

Question 54

T sheet practice Vendor take back mortgage

Answer 54

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: xxx Credit: Seller is involved so he gotta be debited

Question 55

T sheet practice Agreement for sale

Answer 55

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: xxx Credit: Seller is involved so they gotta be debited

Question 56

T sheet practice Legal / conveyance fees

Answer 56

Buyer (Purchaser) Debit: xxx Credit: Seller (Vendor) Debit: Credit: *this is the sole responsibility of the buyer

Question 57

T sheet practice time Legal fees to discharge a mortgage

Answer 57

Buyer (Purchaser) Debit: Credit: Seller (Vendor) Debit: xxx Credit: *the buyer has nothing to do with discharge

Question 58

T sheet practice Security deposit, rings, boats, items

Answer 58

Buyer (Purchaser) Debit: Credit: xxx Seller (Vendor) Debit: xxx Credit:

Question 59

T sheet practice Property Transfer Tax

Answer 59

Buyer (Purchaser) Debit: xxx Credit: Seller (Vendor) Debit: Credit: PTT is only the buyers responsibility

Question 60

T sheet practice Share of taxes already paid by seller

Answer 60

Buyer (Purchaser) Debit: xxx Credit: Seller (Vendor) Debit: Credit: xxx

Question 61

T sheet practice Penalty due on overdue taxes

Answer 61

Buyer (Purchaser) Debit: Credit: Seller (Vendor) Debit: xxx Credit:

Question 62

__________________: confirms the boundaries of the property and the location of any buildings in relation to its boundaries

Answer 62

Survey

Question 63

What four items are included in a survey

Answer 63

1) parcels boundaries 2) Legal description 3) Location of all structures 4) Property interestS (such as easements, covenants, right of ways)

Question 64

In case of _______________, the lender will likely refuse to advance the mortgage funds

Answer 64

Encroachment

Question 65

What is encroachment

Answer 65

A fixture, such as a wall or fence, which illegally intrudes into or invades public or private property

Question 66

____________________ May serve as a substitute for a survey, and the premium may be less than the cost of a survey

Answer 66

Title Insurance

Question 67

Title insurance policy may resolve _________ revealed by a survey

Answer 67

defects

Question 68

In case of __________________, title insurance may permit the lender to advance the mortgage funds, despite the _______________

Answer 68

Encroachment X2

Question 69

Title insurance is a device to protect an _______________ or a ______________ against certain losses associated with title defects or related problems

Answer 69

Owner Lender

Question 70

Title insurance covers related problems such as

Answer 70

- charges, liens, easements, encumbrances - lack of right of access to land - forgery, fraud, duress - 3rd party interest in title - The owner being forced to remove an existing structure (not a boundary wall or fence) 

Question 71

 what are the three closing procedures

Answer 71

1) preparation of documents 2) application for registration 3) payment

Question 72

Preparation of documents involves

Answer 72

1) form A - freehold transfer | 2) property transfer form

Question 73

Application for registration involves

Answer 73

1) form B - new mortgage | 2) pending applications

Question 74

Conveyancers make closing payment based on ____________________. They do not have to await final registration of the conveyance before making closing payments

Answer 74

Pending applications

Question 75

Payment

Answer 75

Balance due to complete