Pitfalls to avoid at the closing table
PRESENTED BY: DANIEL S. SCHLECK
September 5, 2008
“You got nothing until it Closes . . .”
-Donald Trump, 1999
Topics to be Covered Today
- Pre-Closing Issues
- Closing Challenges
- Post Closing Clean-up
Pre – Closing Issues
1. Start with a good purchase Agreement
- State Bar Form vs. Board of Realtors
2. Be very specific with Lender
- Who is Buying
- Who is Borrower
- Qualifications
3. Minnesota Issues
- Assigning Purchase Agreement
- Predatory Lending/Equity Stripping
4. Contracts for Deed
- Get an Expert
- Be Careful of Equitable Mortgages or Predatory Lending
5. Auction Issues
- Survey Issues
- Clear Title
- Spread on Loan and Contract
6. Financing
- Mezzanine Debt
- Form of Acquiring Entity – Consider LLC
Closing Challenges
1. Walk-through Problems
2. Closing Cash Requirements
3. Property Still Occupied
4. Unfinished Repair Work
5. Liens
6. Buyer's Remorse
7. Changing The Deal At Closing
Walk Through Problems
1. Make sure you complete a walk-through
2. If you identify issues, document them with pictures
3. Weigh immediate disclosure vs. closing
4. Credits can go along way to address this issue.
5. Minnesota Mandatory Disclosure Requirements
Closing Cash Requirements
1. Always bring more than you think you need
- Need Guaranteed Funds (Certified Check)
2. Be persistent with Closing Agent to get a good estimate.
3. Ask about
- Taxes
- Assessments (Be careful of Installments)
4. In series transaction discuss wire transfers ahead of closing. (Get wiring instructions from banks)
Property Still Occupied
1. If rental, review the lease
- Review Security Deposit
2. Normally only required to deliver property
3. If Seller, be careful of leasing back
- Insurance Requirements
4. Unlawful Detainers
Unfinished Repair Work
1. Lien Waivers – Look at Title Policy
2. Escrow of Funds with Title
3. Assignment of Contracts
4. Manage work yourself with your own contractors
LIENS BUY TITLE INSURANCE !!!
1. Worst issue to deal with at Closing
2. Mechanics Liens
- Seller Bond Over
3. Marital Liens
- Letter of Undertaking and Escrow Funds
4. Tax Liens
- Pay out of closing proceeds
Buyers Remorse
1. Doesn’t happen too often
A. More often now if can’t sell existing house
2. Implied Covenant of Good Faith and Fair Dealing in Minnesota
3. Get lots of Earnest Money and have PA written well so you can keep
Changing the Deal at the Closing
1. Be Careful If Dealing With Another Investor
2. Stick To Your Terms
A. Threaten Legal Action
3. Do Not Let Closing Agent Disburse
4. Post Closing Agreement
POST CLOSING CLEAN-UP
1. Leases And Occupancy Agreements
- Short A Term As Possible
- Escrow Lease Payments And Deposit
2. Escrows
- How Do You Get Money
- Lien Waivers
3. Title Issues
- Torrens Registration In Minnesota
- Letter Of Undertaking
- Title Insurer Responsibility
4. Condos and Homeowners Associations
- Read Disclosure before Closing
- Non-Rental Clauses
- Overdue Assessments
5. Post Closing Agreement
- Do one !! Get a Lawyer to Help
Summary
1. Read Everything
2. Know the terms of deal
3. Be Careful
For Further Information Contact
Daniel S. Schleck
Schleck & Associates PA
Two Carlson Parkway, Suite 155
Minneapolis, MN 55447
763-249-2917
dschleck@schleckpa.com