Here are five ways that you can avoid closing problems, so that you can protect both yourself and your clients and stay out of legal trouble.
1. Check out all contracts that need to be transferred in advance and follow through.
When buying or selling, it is not enough to just remember that the hot water tank is rented. There are now a variety of contracts that must be dealt with when a property is sold. These can include furnaces, air conditioning systems, alarm systems and even oil tanks.
Check the gas bill for any extra charges. In some cases, the contract has been sold to a security company while the maintenance is provided by someone else. I have seen situations where the maintenance company has gone bankrupt, forcing the owner to now find someone else to pay for repairs, while they still owe money to the finance company. Ask questions about any contract that is being assumed. Call the supplier to see if the buyer must sign an assumption agreement before closing. In some cases, if the assumption agreement is not signed, the company will still go after the seller for payment of future charges.
2. Ask about the keys and make sure the seller provides two sets on closing.
Never assume that the buyer will receive two sets of keys and garage door openers. Include a clause in the contract to make this clear. If a condominium fob has to be obtained from the management company in return for a security deposit, let the buyer know this will have to be done after closing. Do not forget to include the mailbox key, or let the buyer know if they will have to obtain one directly from Canada Post after closing.
3. Always recommend a home inspection, even in a bidding war.
Buyers are always pressured to submit an offer without any conditions in a bidding war. Advise buyers to conduct a home inspection in advance of making their offer. I understand that their offer may not get accepted, but they will still be better protected if their offer is accepted. If the buyer refuses, in Ontario use OREA Form 127 (Acknowledgement re: Conditions in Offer) to make sure the buyer understands the risks in making an offer without conditions.
4. Get expert advice, when you need it.
If you are not sure about anything during the negotiations, make the offer conditional, whether it is an issue related to zoning, HST, parking or basement apartments. It is enough to just make it conditional upon lawyer approval, or have the client consult with a private planner regarding any zoning or parking issue as part of their due diligence.
5. Stay involved in the deal until closing.
Once the contract is signed, your work is not over. Besides making sure that all deposits are paid and conditions are waived in a timely manner, anticipate potential closing issues and deal with them.
If you know a seller has to complete work on the property before closing, or remove debris, do not wait until the last minute. Be a pest. This will save a lot of potential headaches on closing. If there is any damage noticed at the final pre-closing visit, take a picture, get an estimate and try to make a deal to get it resolved. Solving problems at closing means happy clients, repeat business and referrals.
Be sure to remember these five ways you can avoid closing problems on your next sale.