How to Prepare for Real Estate Closings

Prepare to buy or sell a house or other real estate.

Real-estate closings are never the same. Sometimes, the closing goes so smoothly you can't imagine why people ever have trouble. Other times, the experience can be such a nightmare that you wonder why anybody would ever willingly go through it more than one time in his life.

The reason real-estate closings can vary so much is because real-estate law is vague, misunderstood and misapplied. Some of this is the result of human error, but some is simply unavoidable because of the nature of geography. In all cases, however, you can prepare yourself so that, at the very least, there are no surprises on the date of closing.

Things You'll Need

• Legal property description

Instructions

Real Estate Closings

1. Order a physical inspection of the entire property and all buildings on the property. An inspection will reveal any obvious physical problems, and may help alert you to potential environmental problems such as a leaking oil drum or gas tank.

2. Order and review a title report on the property. You should review the title report well in advance of the closing, as the title report will indicate any liens or encumbrances on the property.

3. Resolve any outstanding title issues before the date of the closing. This may include paying off lien creditors or removing incorrectly filed encumbrances on the property.

4. Research the property description with your state's department of environmental quality. These state agencies keep records on environmental issues, so if the subject property has ever been the subject of a state investigation, you want a copy of that record.

5. Purchase a policy of title insurance. The policy should not contain many exceptions, and if necessary, should include endorsements necessary to cover liens or encumbrances that you are aware of but have been unable to remove.

Tips & Warnings

• Most real-estate transactions don't require an attorney's participation, but it never hurts to hire an attorney to review the transaction. Attorneys have unique training and skills to review title documents, environmental reports, and other important documentation. Like a radiologist examining an X-ray film, attorneys can spot legal pitfalls almost instantaneously. If you are making a significant real estate purchase, you should strongly consider consulting an attorney.

• The time to resolve title issues is before the closing, not during or after the closing. Before the closing, you have power to negotiate participation from the other side of the transaction. After the closing, however, you are stuck with whatever title existed as of the date of closing. Good, careful planning can be moderately expensive initially, but can save a ton of money by avoiding problems later on.

References

• Land Transactions and Finance; Grant S. Nelson and Dale A. Whitman; 2004;