As we head into the very busy spring and summer real estate markets, here are some tips to remember when you are putting your deal together in the first place, to avoid problems at closing.
1. Avoid buying and selling on the same day
Clients believe they will save money when they buy and sell on the same day. This is incorrect both in actual costs they are likely to incur but, more importantly, considering the unnecessary risks they are taking. Imagine the buyer who does the following: they have the movers arrive at their current home early in the morning to pack up and head over to their new home only to find out that the earliest they will receive keys will be late in the afternoon. This means they’re now stuck paying extra in moving costs for the wait time and – even worse – if their buyer cannot close for any reason, they won’t be able to move into their new home or could default completely on their purchase if the seller does not agree to extend.
To avoid this, we often encourage bridge financing: close the purchase first and then close the sale a few days later. The entire risk is removed and they can move in slowly without any added moving costs.
If the client has no choice but to do both on the same day, do some research with the other buyer and seller to ensure they are not also buying and selling on the same day to avoid a chain reaction of deals not closing. It would also be worth negotiating with the moving company in advance to obtain a storage fee in writing, should this be necessary.
2. Remember to ask for two sets of keys
I can’t tell you how many times buyers have complained when they have not received two full sets of keys, garage door openers and FOBs on closing. How about using the following language:
“Seller agrees to deliver to buyer on closing two complete sets of keys, garage door openers and FOBs for complete access to the condominium unit, the mailbox, the building, parking garage, all common areas and the locker unit for the property purchased. If the seller fails to provide any key, garage door opener or FOB, then the Seller shall immediately pay the Buyer the actual replacement cost of any such key, garage door opener or FOB or the Buyer shall be given a credit for this amount on the final statement of adjustments.”
3. Conduct due diligence on any rental contract
Many sellers are now buying more than the hot water tank on rental. Find out in advance about any contract that must be transferred to the buyer on closing so there are no unwelcome surprises – the gas bill is a great place to start as this is where most of these charges appear. Then consider using the following clause to properly protect both the seller and buyer:
“Buyer acknowledges that if there is an existing hot water tank, water treatment system, furnace, HVAC, alarm system and/or propane tank that may be subject to a rental agreement, lease agreement or conditional sales contract, (the Rental Agreements”) notice of which may be registered against title to the property, then the Buyer shall, upon closing and thereafter, be solely responsible for all future costs and other obligations related to the Rental Agreements. In the event the obligations under any such Rental Agreement are not effectively assumed and/or transferred to the Buyer on closing, the Buyer agrees to indemnify the Seller in respect of all such obligations and to reimburse the Seller for any payment or payments made by the Seller under the Rental Agreements for the period after closing. This provision shall survive and not merge on closing.”
4. Know when to ask for help
Issues regarding parking pads or permits, basement apartments, zoning, building permits and lot coverage are not easy to figure out. If you are not sure, make the deal conditional upon lawyer review or further due diligence. Consider hiring a private planner who is experienced with the applicable city by-laws to assist you. If you have an issue with a tree on or near the boundary line, contact an arborist as cities have different by-laws when it comes to taking down trees or cutting roots or branches.
5. Little things matter
Is the closet organizer or television bracket included? Being clear about all the little things in your deal will help your buyers and sellers avoid aggravation after closing.
By being properly prepared when you sign your agreements in the first place, your clients will appreciate your services even more, which should lead to more repeat business and referrals.
The article above is for information purposes and is not legal advice or a substitute for legal counsel.
Editor’s Note: These are some great tips Mark has collected during his 30+ years practicing real estate law. What added tips would you share with your fellow REALTORS® to avoid problems during closing?