Countdown to Closing

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Once you have a Purchase & Sale Agreement or any counter-offer signed by both parties, you have a Binding Agreement and the date when this contract became binding becomes of UTMOST importance. Why is it so important? Once a contract becomes binding, the clock begins ticking… and you have certain windows of time in which you must perform agreed upon actions as described in the Purchase & Sale Agreement.

This is where the importance of working with a diligent, reliable REALTOR® with strong organizational & communication skills is vital. It becomes partly the responsibility of the agents of the Sellers & Buyers to ensure their clients fulfill their contractual obligations.

Now comes the part about Due Diligence.

The average buyer will select Due Diligence as a method of buying the property. This means that they are actually creating an ‘option’ contract for a set period of time from Binding Date. What is an option contract? An option contract is one where the Buyer ‘buys’ an option to buy from the Seller for a specified period of time for a set amount of money. During this time period, the Buyer may select to ‘exercise’ his option and purchase the property.  If he decides not to, he doesn’t have to do anything and the option simply expires.  The Seller, however, during this option period cannot sell to anyone else.  He must essentially wait to see what the Buyer decides to do.  If the Buyer decides to buy, the Seller MUST sell.

So how this apply to the purchase and sale agreement?  Well, when the Buyer selected Due Diligence in the initial offer, he also selected the number of days that the due diligence period should last.  This was negotiable between the Buyer and Seller, and hopefully, in the end, you came to a number of days with which you both could live.  Say you agreed that the buyer had 14 days to conduct his due diligence.  Well, those 14 days are actually the days of the option period. During this time, the Buyer must conduct all his inspections, surveys, appraisals and decide firmly if he wants to proceed with the purchase.  It is now during this period he must get all his financing completed so that by the end of the due diligence period, he is ready and able to close.  Unlike a regular Option Contract that expires with nothing binding on the Buyer, inside the Purchase & Sale Agreement, when this period ends, the Buyer is now fully obligated to buy. If the Buyer wants to terminate the contract for any reason at all, he must do so inside the window of this due diligence/option period.

As a seller, you don’t have to do much but make your home available to the various inspectors, appraisers, and what not.  You and your agent should be watching the calendar carefully.  More than likely, the Buyer will submit something called an “Amendment to Address Concerns with Property.” This form is a formal amendment (change) to the terms of the binding contract.  For the most part, most buyers use this form to request repairs be made based on their inspection of the property. Some use this opportunity to re-negotiate the purchase price.  Some may make additional request for stuff like asking for appliances, home warranties, etc.  It’s all open for more negotiations!

Meanwhile, on the Buyer’s side… it is your agent’s responsibility to keep tabs on what the Buyer is doing on your behalf. Your agent should follow-up with the Buyer or Buyer’s Agent periodically to ensure they are fulfilling their obligations in the contract especially in the way of the financing.  You can even request that the Buyer provide a ‘Verification of Funds’ once their financing is in order to ensure that there are no surprises right before closing.

Any repairs that you agreed to make must be completed prior to closing.  You agent should be able to refer you to competent contractors.  Meanwhile, the closing attorney does the work to check the title to the property.  If there are any problems with the title, you will be responsible for getting it cleared up.  Otherwise, you can focus getting packed and ready to move.  Let your agent handle the details…

The Buyers agent and your agent should work together to make any arrangements that require access to the property and ensure all proper amendments are signed and forwarded to the closing attorney, keeping all parties informed of the status of the contract and the closing.  Your agent will probably forward your information to the closing attorney – who should then contact you for information on your existing mortgage for pay-off amounts.  You have the option at this time to let the closing attorney know if you would like the proceeds from the sale to be given to you in the form of a check at closing or as a wire transfer directly into a bank account.

If you are not available for the actual closing or happen to live out of town/state, closing documents can be emailed to you a few days prior to closing.  The selling side’s paperwork is a but simpler.  There are forms, however, that will require a notary public stamp.  All you need to do is overnight these forms back and your part is effectively done.  Let your agent know as early as possible if you need to do close your transaction via long-distance methods!
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