closing process

The purchaser’s goals and objectives should be fully and adequately conveyed to the real estate professional to enable the real estate professional to research various sources of information and then, based upon experience make recommendations to the purchaser as to various properties available to meet the purchaser’s goals and objectives.

In the not too distant past, real estate professionals were the only ones that had primary access to information databases regarding real property. This was commonly referred to as the MLS or Multiple Listing Service. Today, however, with the advent of the internet much of the information which is available to the real estate professional can also be directly available to the purchaser. Having the information, alone, is not sufficient. Real estate professionals are able to take the information available and advise a purchaser on such things as the appropriate offering price and terms. An experienced real estate professional can also advise the purchasers on various trends. For example, based upon experience, a real estate broker or salesperson may be able to advise a purchaser that property values in a certain location are either increasing or decreasing or that the neighborhood of a specific property may be trending towards more commercial or industrial use. All of these factors should be considered by the purchaser in determining whether to make an offer to purchase the property and if so on what price and terms.

It is the attorney’s role to advise the client on the terms and conditions to be set forth in the contract for sale and purchase to insure that the purchaser will actually receive what the purchaser expects and at the appropriate price. It is very common in residential real estate transactions to use form contracts. However, there are several different form contracts. By example form contracts are promulgated by various organizations such as the Florida Association of Realtors or the Florida Bar. Using one of these form contracts, however, does not always insure the buyers and/or sellers’ rights, obligations and duties are adequately addressed. This is why it is essential to consult a real estate lawyer so that a form contract can be customized to define and achieve the goals of both buyer and seller. This is probably the single most important point in the transaction. Once the contract is executed each party’s duties, obligations and rights on each side are defined. The Contract then acts as a guide setting forth various things that need to occur before closing and a time period within which certain things must be done.

Following execution of the contract is the due diligence or inspection period. This is when the buyer retains the appropriate construction professionals, i.e. contractor, plumber, electrician, engineer and architect to perform physical inspections of the property to determine the property’s condition. Here again, the contract should define or describe the condition of the property which the seller is obligated to deliver to the purchaser at the closing. The inspection or due diligence period allows the purchaser to determine whether the property is in that condition or whether repairs must be made. It is during this stage that issues may arise regarding the interpretation of the contract on these various issues. A well drafted contract will tend to minimize those issues and thereby promote a smoother closing.
During this same time period the real estate attorney will perform what is called an examination of the title. This involves a review of the public records and tracing the chain of title to insure that the seller under the contract has the legal right and authority to convey title to the property. This title examination can be fairly time consuming and usually involves review of numerous and lengthy documents. It takes a real estate attorney to review and understand the importance of these numerous documents as they may affect the title to the property and/or place restrictions on the use of the property. Based on the title examination, the real estate attorney will advise the purchaser whether the property is suitable for the purchaser and the purchaser’s intended use. This is important even in residential transactions. The real estate attorney also performs another very important function as it relates to financing. The purchase of most properties involves financing. Real estate attorneys often can refer purchasers to financial institutions who offer competitive rates and terms in connection with real estate mortgages. A knowledgeable and experienced real estate attorneys can also consult with and advise the purchaser on the loan documents and fully explain to the purchaser the rights and obligations of the purchaser under the loan documents. This would include the interest rate, the terms of payment and what happens in the event there is a default. All of these items should not be overlooked by the purchaser.

By the end of the inspection or due diligence period all of the issues relating to any repairs that need to be made to the property should be resolved. Upon completion of the title examination the attorney will issue a title commitment which should set forth all of the requirements that need to occur and documents that need to be executed in order for the purchasers to acquire good title free and clear of liens and encumbrances except the purchase money mortgage. Competent real estate attorneys have experience in clearing liens and/or other problems so that the purchaser will receive good title at the closing. For any liens or mortgages that appear on the property, the real estate attorney will obtain from the mortgage holder or lien holders the correct amounts to be made so that those liens or mortgages can be removed before or at the closing. Most times checks will be issued at the closing to insure that these liens and mortgages are satisfied. Usually the attorney for purchaser will undertake to pay off the liens and mortgages out of the Seller’s closing proceeds. The next important step in the closing process is the preparation of the closing statement. The closing statement sets forth the amounts due from the purchaser in order to close the transaction along with all of the other charges and expenses to both parties in connection with the closing. Once the closing takes place and all the documents properly executed the real estate attorney insures that the warranty deed, mortgage and other documents are properly recorded in the public records thereby completing the process.

PA Settlement Services can guide you through this closing process without any problems. Call or e-mail us today, we are here to help you!