Part 2 – Real Estate Closings: Begin with the End in Mind

Part 2 – Real Estate Closings: Begin with the End in Mind

            I want to cover something I think is foundational but so often overlooked when it comes to real estate closings.  When a property is placed under contract and there is a mirror image offer and acceptance between a ready, willing and able buyer and a ready, willing and able seller (notice how that language excludes the fake wholesalers?), then one of three things will occur with that contract:

  • At some time during the due diligence period, it will fall out of contract, either because additional information becomes known to the buyer relative to the subject property, causing them to decline to go forward pursuant to the terms of the contract, or information about the buyer’s inability to perform becomes known to the seller.
  • The buyer would choose to assign the contract to another buyer who is even more ready, willing and able to proceed to closing than the original buyer.
  • The buyer actually closes on the contract, and the seller transfers good, marketable, insurable title from the seller to the buyer.

Those three choices cover 99.9% of all outcomes in real estate transactions.

            So, how does the title company or closing attorney know what to do?  The most immediate answer is by looking at the Purchase and Sale Agreement (or Purchase Contract, whatever you call it in your location).  That document, whether 1 page or 15 pages long, should clearly explain who is buying, who is selling, the pre-conditions that must be met, when the transaction is anticipated to close, and how it will be paid for.  Obviously, another important consideration is that the parties to the contract have agreed as to which title company or closing attorney is handling the transaction.

            Regrettably, I have seen Purchase and Sale Agreements that have been shot out on a near mass-marketing basis in an effort to spray as many as possible across the real estate landscape.  In these agreements, the potential buyer has omitted a lot of the important information which should be included in the contract.  This may be based upon the assumption (and you know what happens when we make assumptions) that the seller will not accept the contract as offered but will counter back.  While that may be in some instances, you need to make sure your offers, if they are accepted as presented, are full, complete, valid contracts with all the necessary information in them so the title company can handle the closing.

            An offer needs to be well written, not just so every participant in the transaction knows what is going on, but so that the title company and anyone else involved with facilitating the deal know what is happening and needs to be done as well.

            More to come in future emails on other important considerations relative to the three possible outcomes of a valid real estate transaction.