Just last week I worked with some Sellers and there was a $12,000 Buyer’s closing credit in the deal. However, since Buyer’s were using an FHA loan they had to put at least 3.5% of the purchase price into the deal. So, Buyer’s couldn’t get full credit for the $12k at closing and more importantly their bottom-line thus needed to be about $9,000 cash to close versus $1,500 cash to close. Needless to say, Buyer’s attorney hadn’t prepared them for this eventuality. Miraculously this deal closed because the Buyer’s could bring in extra dollars.

But, if I’m those Buyers my summary recollection for my first home purchase is, “remember that sloppy attorney who was $8,000 off in his estimate of funds to bring to closing.” Nope, I’m not recommending him to anyone else.

In conclusion this is a thoroughness issue. The day before the closing you’ve got to review the file…contract, attorney review letters, title charges…simply know the numbers and advise your client accordingly.

YOU WANT YOUR CLIENTS TO REMEMBER YOU…BUT FOR THE RIGHT REASONS!

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Closing had been scheduled for quite some time for last Wednesday but surprise, surprise our Buyer’s lender starts to have problems and reasons that cause delay.  So we push closing back to Thursday, no biggie and nothing too surprising to me.  Yet keep in mind, this is a short sale and Seller’s lender require their funds by Thursday…they will accept a wire so fine. Closing scheduled for Thursday @ 930am. My clients are signing their loan package locally in another state and Seller/attorney and I are handling sales/title docs here in Chicago. Due to what I’m hearing I KNOW this will be a slow closing so no biggie, I bring other work to do and schedule some other meetings downtown that day which I can handle as we’re waiting on the lender/money.

By Thursday, 2pm my clients are finally able to sign their loan package and their loan processor in FL wires funds up to Chicago title company…alright, all’s well that ends well. NOPE! Wire was sent to wrong recipient account here in Chicago and error isn’t realized until 4pm and that’s the cutoff time for wires, so we’re finished by not closed as of close of business on Thursday. Calls are made and Seller’s lender is okay if they get the payoff funds early Friday a.m.

By Friday I’ve mostly moved on to other things on my agenda and all that had to happen was a wire had to be re-sent Friday a.m., right? Yes, but I still got a call at 1pm, Friday from Seller’s attorney saying wire hadn’t hit in Chicago yet. Well, to bring this lurid tail to an end, wire hits around 2:30pm Friday and payoff wire to Seller’s mortgage holder gets out and then “it is finished.”

But this got me thinking about a couple things:

1. When is a closing closed?

–Is it when all docs are signed? Is it when wire has been sent (and there’s a Federal Reserve tracking #)? Is it when wire is actually received? This wasn’t so much an issue Friday as much as another transaction frankly where I had a psycho client/Seller. Client was a very nervous sort of person to start with and against our advice she opted to attempt to do back-to-back closings on one day. And at her Buyer’s purchase the wire was slow to hit which was going to delay her purchase that afternoon and all her stuff was on a moving truck and…just a combustible situation. So as her Buyer’s delay/wire lingers she’s saying I’m done, we’re not closing. But everything was concluded and all we were waiting on was a wire.  And it’s my understanding that a properly sent wire can’t be undone so it’s going to be received eventually. But what if like in my deal from last week it wasn’t sent to correct account and then Seller just rips up all the sales conveyance documents? Leaving contractual liability aside, is that a closing?

2. What if Seller’s lender above wouldn’t accept late payment or what if wire received at 4pm Friday and payoff wire couldn’t be sent until Monday?

–This is what I was really worried about last week. Once we got past the date that Seller mortgagee had agreed in writing to accept payoff, would they balk and say we’re not doing this now? Once my client’s purchase closed then I think their title insurance company would be on the hook for protecting them from anything that Seller’s mortgagee would do since that mortgage and the foreclosure case were waived at closing. But even if Buyer’s are covered who wants to buy a lawsuit regardless. Practically you’d think paying the Seller’s mortgagee a few bucks for the extra day would solve the problem.

Fun times in the real estate market!

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They aren’t secrets actually but it sure seems like it sometimes when a transaction drags on several hours or days. I actually had a fun and fast transaction that closed last week and it doesn’t happen by chance. Some keys to make your closings fun & fast:

Plan & Discuss Closing Scheduling Up Front. If I’m Buyer’s attorney this is discussed with my client right up front as part of my initial contract review. There’s typically an estimated closing date in the contract and we discuss if that’s okay or an alternative and also what’s convenient in terms of a title company closing location. Once you’ve done this, communicate with the Seller’s attorney immediately about a convenient closing time and location with Seller/attorney. So an expecation has been set right up front.

Present a title commitment to Buyer’s attorney and Buyer’s lender about 14 days pre-closing. My rule on this is not too early but also not too late…if necessary err on the side of being early. I say not too early because you don’t want to waste time ordering/preparing/reviewing a title commitment if the deal feels shaky. Assuming you have 30-45 days in the transaction, get 10-15 days in, make sure the deal feels solid and then get your title commitment ready. In my experience these days there’s only 2-3 days between placing a title order and getting a title commitment back from your title company.

Seller’s attorney MUST get figures in early & accurately.  You must get these in the business day prior to the closing. And accurately…scour the Contract and any agreed upon modifications so you properly include every credit, commission, attorney’s fees, others items being paid at closing (survey, association fees), ect. Changes to the HUD-1 Settlement Statement are a major cause of unnecessary delays.

Buyer’s lender MUST get figures in early & accurately. You don’t have a lot of control here as either attorney but you can barrage them with phone calls I guess.

Seller’s attorney must provide all necessary documents and the documents must be accurate. Seems like this is implicit as the Seller’s attorney but I’ve surely had closing’s where the documents were all wrong or a document was forgotten (the certificate of insurance for a condominium association is a popular culprit). My worst experience in this area was a new construction property where the Seller’s attorney didn’t appear at the closing AND his documents were all wrong…great lawyering buddy!

Buyer’s attorney must know the documents that are important (and not) and control her client(s) during signing. Right? The HUD-1 and all its figures, the Note, Mortgage and the Seller’s documents are critical…most of the rest are just repeating the same information 5 different ways. I think I used to waste a lot of time going through every document in detail as a younger attorney. Though, once in a while you’ll have a festidious client who demands discussion of each and every page, so you just gotta do it.

Lender’s should stay by the phone until a deal’s closed. Kinda obvious, no? Yet it’s amazing how often there are delays because a closer can’t get the lender’s closer on the phone.  My fun and fast closing last week took about 45 minutes but it could have been 30 if the lender’s closer had been easier to track down.

Real estate closings are all about planning starting from the day a contract is signed. And slow closings aren’t the norm…a slow closing need not be the norm, nope, it just means somebody screwed up.

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So here’s how things went down…

4/30/09 – Closing scheduled directly with Seller’s attorney’s office (I have the Buyer) with carbon copy (acknowledged) by lender setting closing for today, 5/6/09 @ 11am. It feels like a ho-hum transaction with client having no difficulty with lender issues and really only concern being Seller vacating property by closing…elderly, non-English speaking Seller.

5/4/09 -Primary client contact with CitiMortgage says client/Buyer is ‘clear to close’ and 5/6 closing date seems solid.

5/5/09 – Strangely my office gets an e-mail correspondence from Citi’s loan processor midday asking whether or not the closing has been scheduled (don’t these guys communicate with one another?? See 4/30).  Nonetheless once she’s set straight she claims we’re still fine to close 5/6 @ 11 a.m.  Yet, as of close of business title company has no lenders figures nor a lender’s mortgage package. So I’m getting concerned.

5/6/09 -

9am – Still no lender figures/package at title company and calls to lender go unanswered…I’m thinking we’re not closing at 11am.

10am – Client calls to say walk-thru went well…sort of suprising and the only good news for today. I’m on hold not wanting to head out to Seller’s attorney office since I know nothing will happen without lenders stuff. So I work the phones and continue to hear nothing from Citi’s loan processor.
11am – Finally hear from loan processor who says the closing is canceled because of a problem with the title company’s closing protection letter. The problem? I kid you not, the title company’s logo hadn’t come though on the letter and this had Citi canceling the closing like that.
1130am – We go over loan processors head and issue is resolved and closing’s back on set for 2pm.
**Good news, but a bit of communication upfront sure would have avoided unnecessary frustration.
2pm – We show-up at Seller’s attorney for closing. Seller has pre-signed and attorney isn’t around. Seller’s figures are wrong and attorney can’t be reached via telephone. I make necessary HUD corrections and we proceed to sign Buyer’s mortgage package. Slight delays on Buyer’s two wires hitting but within the realm of normalcy.
330pm – Couple major problems…corrected HUD now shows Seller owing some $500. No big deal, unless your attorney had suggested to you several hours before that you’d be receiving proceeds of $10,000! Yikes and Seller doesn’t just rush in with the $450…she’s pissed.  Meanwhile, listing real estate agent doesn’t appear at closing and no one knows where the property’s keys are.
415pm – Seller can’t be tracked down and Seller’s attorney still nowhere to be found. We dry close with Seller’s attorney to meet with client first thing tomorrow morning to explain how +$10,000 became -$450. And there’s nothing unethical going on with attorney just overlooked some Seller costs and unfortunately has created unrealistic expectations with Seller.

Ugh!! A consistent lender problem: bad communication. On the attorney side, it ain’t rocket science, but thoroughness and an attention to detail are critical.

Tomorrow:  The Conclusion…I think.

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