Closing – It should be smooth right?

If you ever bought a house (your own or for investment) before, you know that closing could be a little stressful. You worry about the inspection, the appraisal, the title company, the loan officer, and the list goes on and on. When you bought that property and used a real estate agent “generally” speaking the agent is the one who monitors the whole process from signing of contract to close. The agent helps to minimize the stress of this process.

As investors we do from time to time buy from another investor. Since there is no agent involved to help with the process of closing (making sure things are getting done like coordinating the closing between parties) who should take the lead in making sure the closing process goes as smoothly as possible (that is the hope anyways), the buyer investor or the seller investor. What do you think will happen if each side “assumes” the other is going to handle the closing? Chances are the closing will be delayed until someone steps up and makes sure the closing does happen.

Let’s go ahead and look at what each side could do to ensure the closing does happen as smoothly as possible.

Let’s start with the selling investor. If the selling investor chose the title company, this investor should take the lead in setting up the closing date as a minimum. If the contract says closing is date xx, try to get that date on the books with the title company (closing attorney) as quickly as possible. I also believe it is the selling investor’s task to coordinate this date with the buying investor. This at times could be difficult but shouldn’t. The contract says date xx and both parties agreed to that so this should not be an issue. IF something comes up that the date has to be changed, both parties need to come together and talk about this and set an agreeable date to both. OK, let’s move on.

The buying investor will use a bank for the funding of the purchase. Easy right? Not always. It is buying investor’s responsibility to do the following:

• Ask the lender to get the appraisal done immediately. This is a huge hang up if that appraisal is not done. This needs to be ordered a day or two after contract is signed.
• Inspections. If the buyer needs the house inspected, order this immediate also. Don’t wait a week or two into the contract. Get the inspection done as quickly as possible.
• Keep the selling investor abreast of the process. That investor needs to know you are on top of what you are responsible for. Don’t wait for the selling investor to ask you how things are going. Give it without asking. Be cooperative. Be workable. Show that you want this transaction to close. Keep in mind you are also showing the selling investor you are great to work with. That is huge. More deals are made this way.
• Once the appraisal is in ask your lender if they will meet the closing date. This is very important. You must stay on top of this. Be straight with your lender that you want to close on time or early if possible. If you have a great relationship with your bank this generally is not an issue. The lender knows it doesn’t take long to do their paperwork once the appraisal is in. The lender should be able to tell you if they can make the set closing date or not.
• Make sure the lender has the contact information of the closing office. Also make sure that the lender and the closing office are talking to each other and keeping the selling investor in the loop (this is important). Wire instructions from the closing office would be great to have right?

Here are some other things that the selling investor could do:

• Make sure all parties have a copy of the contract especially the closing office.
• Help set up the closing date and time. Hopefully the closing date is what is agreed to in the contract.
• Keep in contact with the buying investor. Ask for a status report. You need to know what is going on. Ask questions about the appraisal. Ask about the inspection (if there is one).
• Offer assistance to the buying investor to help make the closing process go smoothly.
• Keep in contact with the closing office and find out what else they need so that you can close on time. Give wire instructions if so desired.

The closing between investors should be really easy provided that both be active in the closing process. Both need to understand their roles. Both need to understand that there are some things one cannot do because it is not their responsibility like making sure the appraisal is ordered. If both investors have the same goal, to close as smoothly as possible, then no matter happens it will be easy. Both need to execute to best they can for a smooth closing.

So the bottom line is this, both sides need to be proactive in the closing process. Each should work hard to ensure that all items are completed on time (as much as possible). Each side should be understanding that a slip in closing date affects many other parties so try to stand by the date on the contract or the agreed to closing date.

Please feel free to comment and add to this article. I hope this has helped some of you.

Author

John Morey enjoys real estate investor. He does buy and hold on single family and multifamily homes.

Real Estate Investor in North Alabama

www.jpregroup.com