10 Proactive Steps to Ensure a Timely Closing

Get ready for listings and start taking proactive steps. Here are some tips to consider when advising sellers listing a home for sale.

 

1. Do a title examination.

   A high percentage of properties being sold have title issues, ranging from minor defects that can be corrected easily to significant defects that might require time to cure or even require a court order. It is usually the Buyer’s obligation to conduct a title examination, but why wait to find out there are issues on the eve of closing? The Seller should locate his or her owners’ title insurance policy (if available) from when they purchased the property and have an attorney do a title “rundown” to ensure there are no title issues. Common pitfall areas:

• Property held “in the family” for many years. If the chain of title was not reviewed for some time, perhaps a long-standing title issue was never discovered.
• Trusts, Estates and Powers of Attorney. In many instances, a very fundamental question to be asked (and overlooked when an offer is made and accepted) is: Who are the actual record owners? Title standards can be strict, particularly regarding Estates, Trusts, and Powers of Attorney.
• Undischarged mortgages and missing assignments. Most Sellers are unaware that a mortgage they refinanced was never actually properly discharged, or worse, there is a missing assignment when one lender sold to another lender on the secondary market. These could take months to obtain.

 

2. “Pull the Jacket.”

   Have the Seller (or if you are comfortable doing so, you could) check with the building department on whether the property has an “open permit” for work completed, but that had not been inspected and signed off by the building inspector. Remove the uncertainty that flows from having imperfect information and stop by your Town’s building department. Most Buyers, through their counsel, will be checking for this or asking that the Seller close open permits. Getting ahead of this could help.

 

3. Proactively inspect smoke and carbon monoxide detectors.

   Depending on the town or city scheduling an inspection could take weeks. Schedule the inspection early enough so that if corrective action is required you have plenty of time prior to closing. For older homes that have not recently passed a fire inspection, you might consider retaining a consultant to reduce any surprises and to get ahead of potential costs bringing the property into compliance.

 

4. Condominiums. Condominiums pose another set of possible issues that could arise. Some common examples:

• The chain of title for parking spaces and other exclusive use areas become convoluted over time.
• The floor plan was modified without proper approvals.
• Trustees are not properly appointed, and Buyers question the validity of the 6(d) certificate.
• MLS Disclosures are not substantiated by the Condominium Documents.
• The Trustees or Unit Owners have a right of first refusal to purchase the Unit.

All the condominium documents should be reviewed to ensure the MLS Listing Sheet is accurate and, ultimately, the Seller is able to convey the Unit and rights the Seller believes it currently possesses free and clear of rights of others.

 

5. Multifamily properties and tenants.

   For multi-families confirm the current use is permissible (as a three-family, for example). Although a Seller might attempt to sell a property “as is,” the buyer arguably can terminate an agreement if the use is not permissible. Identify all tenants and occupants, whether a security deposit and last month’s rent were properly held, and which tenants will remain and which must vacate the premises at closing. If the property is to be delivered (partially) vacant, advanced planning and serving a formal notice to quit is advisable to ensure closing in a timely manner.

 

6. Tax Considerations.

   Any disposition of real estate should be vetted by a certified public accountant. Investment properties might present an opportunity for deferred tax treatment through a 1031 Exchange. Multiple property owners holding as tenants-in-common may wish to strategically allocate proceeds, assuming such allocation is properly documented and permissible under IRS regulations.

 

7. Fixtures and appliances.

   Have the Seller take an inventory and identify all those items that they wish to remove and take with them, even if it might be obvious to the Buyer and the Seller. Fixtures that are typically included might be obvious, but what about the washer/dryer? The Bose stereo system? The television mount, or the mounted television? Be clear on whether appliances are included or excluded and do not make assumptions on what is or is not a fixture. General language such as “all fixtures and appliances to be included” can help manage seller expectations if that is the intent.

 

8. Powers of Attorney.

   For Sellers out-of-the country and/or leaving for extended vacations, encourage Sellers to have a Power of Attorney drafted and executed early in the process so that any and all original documents can be executed with ease. Make sure the Sellers’ availability (or lack thereof) is shared with counsel and those involved in the process. For a Seller who is incapacitated, make sure the original POA is available and reviewed by title counsel. Title standards must be adhered to for Deeds executed under POA and Land Court guidelines are strict.

 

9. Identify shared use areas.

   Have Sellers identify any shared use areas and whether those arrangements are informal, in writing and most importantly, of record with the Registry of Deeds. What might seem to be an otherwise innocuous informal arrangement to your Seller very well could be a concern to prospective Buyers and their counsel. Below are just a few examples:

 

• Use and Maintenance of shared driveways or private roads not documented.
• Shared sewer lines that are not documented by easement.
• Condominium unit owners who share parking areas or common areas without formal agreement.
• Condominium Documents do not otherwise accurately reflect exclusive or common use areas.

 

10. Orders of Conditions.

    Orders of Conditions (more commonly in the suburbs) could very well pose a hurdle when selling a property. Often, a developer might not have obtained a Certificate of Compliance prior to signing a P & S, and depending on the town, the process to obtain the Certificate could take weeks or months. Call the Town Conservation Commission (or relevant governing municipal entity) to verify there are no outstanding orders or other issues of concern that would delay closing.

 

11. Occupancy Post-Closing.

    If the Seller intends to occupy post-closing, it is best to discuss timelines with the Sellers well before accepting an offer and expected requirements for such occupancy. Typically, any financed transaction will restrict any such occupancy period for 60 days under the terms of the Mortgage. Pier diem occupancy fees, and the amount of the deposit are all terms that should be clarified at the time of the offer when possible.

By David J. Ekelund, Jr., Esq. & William “Bill” O’Neill

David J. Ekelund, Jr., Esq. is a real estate attorney with offices in Boston, Concord, Dedham, and Winchester. David has been practicing 18 years and is a member of the Massachusetts Real Estate Bar Association Residential Conveyancing Committee.

William “Bill” O’Neill is a Marketing Executive for MoneyLetter and serves as Business Operations Manager and Financial Consultant for Asset Strategy Advisors.

 

Please Note: Agents generally have an obligation to disclose all pertinent facts that a Buyer would reasonably deem relevant to its decision to purchase a property, whereas a Seller has a much more limited obligation to disclose. Brokers vary on approach for liability reasons and please keep that in mind when navigating how to handle these issues. You should always consult your broker-owner on its internal policies.

The ultimate goal is to properly set and manage client expectations. Although selling a property should be an uneventful process, taking the aforementioned steps will remove some uncertainty and risk. Taking proactive steps becomes more critical if the Seller is purchasing another home at the same time (or soon after selling a property), particularly if the purchase transaction does not have a home sale contingency.