We have seen what happens when deals do not close. Buyers and sellers sue each other and the only winners are the lawyers. No one gets paid any commission. Here are five tips to remember to make sure your deals close on time.
1. Do not close a sale and a purchase on the same day.
Even when buyers intend to close a deal in good faith, sometimes their financing is delayed and they may need a short extension. This can be a disaster if the seller needs the funds to buy another property on the same day and will also greatly increase the moving bill.
Always advise your clients to consider bridge financing and close the purchase a few days earlier. This way they can move in at a convenient time and just pay some extra interest and set up charges to the lender. That way, if the buyer later requires a short extension, they can pay the seller’s interest costs and all deals can close, without stress.
2. Depending on your market, obtain as high a deposit as possible.
In my experience over 30 years as a real estate lawyer, when buyers put down at least five per cent as a deposit, they find a way to close. This is always a good rule to follow in uncertain times, to make sure your deal will close on time.
3. Try and close within 60 days.
When there is a long closing date, there is also the possibility that market conditions can change dramatically, which could result in buyers no longer being able to qualify for a mortgage or not being able to sell their existing home for the price they expected. This happened to many buyers in Southern Ontario in 2017. Try and keep your closing dates at 60 days to prevent this from happening.
4. Be diligent in advance of finalizing any agreement.
Make sure you check the details of any rental contract before you prepare any offer. Can it be assumed by the buyer or will it have to be paid out on closing? Make sure you actually see the parking and locker units in a condominium that are supposed to come with the unit. Disclose any issues in advance to any buyer, whether it involves a basement unit that is not properly retrofitted or a boundary line issue.
5. Solve any problems that arise.
No matter how much you prepare, things happen in a real estate deal and you need to be able to solve them. If there is damage before closing, take a picture, get an estimate and either have it fixed or provide an appropriate credit. Work together with the other agent and the lawyers to make sure everyone is satisfied with the result. In my experience, when you solve the problem before closing, it results in happy buyers and sellers after closing.