Real Estate Agents must always remain in control of their real estate closings, beginning with the listing agreement and right on through to the closing. Unfortunately, some Agents still believe that upon the signing of the Purchase and Sale Agreement, the only thing they need to do is sit back and wait for the commission check to arrive. They couldn’t be more wrong.
Real Estate Agents who have been in the business for a while know that their work begins when the purchase and sale contract is signed. If the following ten steps are taken, an Agent will find that the work that leads up to closing is much smoother and the chances of having issues preventing a successful sale are diminished considerably.
Establishing the Effective Date
If there is a fully executed contract and everyone has initialed every page and every handwritten change, an “effective date” of the contract can be determined. When things are required to be done by the Buyer or Seller under the contract is first determined by the effective date. Make sure both sides agree on the effective date and get out your date planner.
It would be good practice to write a note to your clients outlining the dates. It will help you remember all the important dates. Be aware that every contract contains the phrase “Time is of the essence”, which means that ‘Almost’ only counts in horseshoes, hand grenades, and nuclear war. If you miss the date you’ve breached the contract. Stick to the dates!
The Mortgage Application
The first deadline is usually the mortgage application. Make sure the Buyer does it within the timeframe specified, usually five (5) days. Ensure that the Buyer has documentation verifying the date of the application.
Sometimes, contracts call for additional deposits to be made. I hate to play lawyer (that’s not true) but failure to meet this date, or any other date, is a breach of contract! Make sure you send or receive confirmation in writing. Escrow letters should be made part of your file – ask for them.
Get the title information (prior title policy) to the closing agent (me, I hope) or confirm that the Seller has none to give. This should have been done upon listing the property.
Existing Mortgage Payoff Information
Get the mortgage payoff information (company, loan number, and telephone number) to the closing agent so that the payoff can be requested early on. It also doesn’t hurt to get a written authorization from the Seller (lenders sometimes require one before providing this information).
Condominium or Homeowner Associations
If it is a condominium or homeowner association, obtain the necessary payoff information. The association documents hopefully have been delivered to the Buyer, triggering the rescission period time clock. If it is a condo, start the approval process immediately.
Home Inspections, Municipal Code Violations and Buyer are Right to Cancel
Make sure inspections are done and the written reports delivered to the Buyer. If the Buyer disapproves of the report, make sure a report is delivered to the Seller if the contract calls for it, and send notice of intent to cancel within the contract deadline.
Recommend to the Buyer that a municipal lien search (also referred to as “lien letters”) be obtained through the closing agent early on. Some contracts require that municipal issues, such as code enforcement violations or citations and open permits, be raised and objected to during the inspection period, otherwise, they are waived.
Make sure the Buyer has selected an insurance agent to obtain Hazard Insurance. Insurance agents must take pictures of the property, which takes some time. Even if it is a condo (where a homeowner’s policy is not necessary), suggest that the buyer obtain contents/liability insurance anyway.
Although the title agent orders the survey, don’t assume that it will automatically happen. When the Buyer is purchasing the property without financing (i.e., an all-cash deal), title agents often assume that the buyer does not want to obtain a survey or simply neglect to obtain one.
This is can turn out to be a terrible mistake for the Buyer. There’s a reason why lenders demand that a survey be obtained: an encroachment can affect the use of the property, the value of the property and can affect the owner’s ability to later obtain financing.
It can also lead to litigation. Worse yet, it can lead to a very upset client. Make certain that the Buyer is aware of the importance of obtaining a survey. If a survey will be performed, make the Sellers aware that a surveyor will come by to inspect the property boundary lines so that there is no confusion or delays. Sometimes it may take some arranging to get the surveyor on the property, so make sure that the title agent doesn’t delay in ordering one.
Following Up With Lender
Follow up with the Lender to ensure that the Buyer has done everything required. You want to make sure that the file gets submitted to underwriting! It has not been submitted, something is incomplete and the Buyer may need some help.
Real Estate Agents should get to know an experienced Real Estate Attorney that is hands-on and should begin by asking other agents of known law firms that handle real estate closings.
Once the deal is closed, then you can start relaxing on your hammock.