Efficient closings save time and increase value.
Because my clients cannot afford to waste time or money, I have endeavored to develop a program to ensure that all of my closings go off without a hitch.
Prior to even entering into negotiations, clients and their attorneys must consider all possible costs related to the acquisition or leasing of real property. To begin, one must ask if the purchase or leasing of real property is for a short or a long term. The answer to that question will determine the paradigm of the entire deal. There must be no surprises in future costs: everything must be considered. That includes everything from financing and taxes to utilities and maintenance.
Whether a property is to be leased or purchased, there must a complete physical examination of the property that must include the services of a respected engineering firm. If alterations are necessary, the costs must be known in advance. Who will bear the costs of the alterations must be negotiated. In the purchase of property, clear title must be properly ascertained through a title search done well before the closing.
In commercially leased space, it is essential that one know upfront if alterations and modifications can be made as desired. For example, it should be ascertained whether one can rewire a space, place special electrical and/or mechanical equipment in the space, or put signs up. It should also be ascertained whether the building provides full access and complete service 24 hours a day, seven days a week.
Timing issues are, of course, an important element to be settled before closing. Does the purchase of property depend upon the sale of another property? If the sale doesn't go through, the purchase may not happen, wasting everyone's time and incurring unnecessary costs.
Once the basic decision-making is complete and a contract prepared, the next major hurdle is the negotiation of the contract terms. Many deals fall apart either because one of the parties negotiates in bad faith, or one party makes unrealistic and onerous demands.
Terms should be discussed with your attorney to determine if they are realistic and reflect your needs. Your attorney should discover from the other side what their general terms and requirements will be.
If you receive a contract that is filled with unrealistic and onerous terms, you may decide not to go forward. A contract that is full of such terms is indicative of unpleasantness to follow. No one wants to be party to a relationship that is characterized by overbearing unreasonableness.
Negotiation is, in essence, a balancing act. Goals and needs of both sides must be sufficiently flexible so that there is an ultimate common agreement. The parties to the negotiation, particularly lawyers and brokers, must balance the needs of their clients with the desire to reach an acceptable agreement, one that both sides regard as fair and equitable.
Once a deal has been negotiated and a contract signed, the next step is the closing. Title reports have been ordered and evaluated. A financing commitment should have been obtained. Insurance has to be put in place. Closing dates need to be scheduled. Liens must be cleared. All documents needed for closing must be prepared: deeds, tax transfer forms, and other agreements and documents.
If problems arise during the closing, the deal can often be kept alive by reasonable means, such as the establishment of escrow funds. There may need to be an agreement between both sides as to who will be responsible for adjournment fees.
The following five rules will help to ensure that a deal will close to the benefit of all involved:
1. Each side must understand all the important elements of the transaction so that there are no misunderstandings.
2. Due diligence: analyze all elements of the transaction to determine the ultimate viability of the transaction. Try to anticipate issues and problems that may arise and then have proposals for solutions, should your anticipations prove correct.
3. Negotiate in good faith and try to focus on contract terms that are most essential. Do not waste time negotiating issues that will not be part of the contract or bear little relevance to the success of the transaction.
4. Make sure that all pre-closing issues have been addressed so that they do not become hindrances to the success of the closing. Such issues include title searches, financing, insurance, taxes and a complete assembly of all closing documents.
5. At the closing have a checklist of all items of importance, including documents, funds, and proof that all outstanding issues have been solved.
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|Title Annotation:||real estate industry practice|
|Publication:||Real Estate Weekly|
|Date:||Mar 12, 2003|
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