Friday, June 29, 2012 was one of the busiest days of the year for most real estate lawyers. Real estate closing days are already stressful occasions for buyers and sellers. When they are scheduled for the end of a month, particularly a Friday before a long weekend, there are added concerns for both buyers and sellers.
Most sellers will be using the closing funds either to pay for a home they are buying on the same day, to discharge an existing mortgage or both. The lender will be giving them a mortgage discharge statement in advance, to indicate what will be payable on the closing date, as well as a per diem interest if they do not receive the money typically before 2 pm. Most law firms are not able to deliver the mortgage monies to the lender in time, so additional interest will be payable. Since Monday, July 2 was a holiday, sellers who sold on June 29 had to pay an additional four or five days’ interest, depending when the lender was paid.
If the seller is using the funds to buy a property, sometimes the buyer’s lawyer is late getting the funds transferred to the seller lawyer. This can result in money not being available for the seller to buy their property before 5 pm, when the government computer system that registers titles closes down. As such, the buyer and seller lawyers will have to negotiate a special escrow closing agreement, to permit the buyer to enter the home late on Friday evening, with the understanding that all title documents will be registered first thing Tuesday morning.
Some sellers may try to use the late delivery of funds to try and get out of a deal. This is very risky. Since most law firms are aware of the problem of late delivery of funds, it is usually not possible for a seller to try and use this at the last minute as a reason to change their mind. They would have had to communicate much earlier to the buyer that precise closing times would matter to them. In a case decided in 2009, a seller tried to cancel a deal after the agent acting for the lawyers could not register the deed before 5 pm. They were one minute late. The court found that the seller was not acting in good faith in trying to cancel the deal because of the late registration.
The next issue is the keys. Buyer lawyers are not permitted to release the keys to their buyer clients until the registration of title or an escrow agreement, as described above, is complete. This can also be very stressful, especially with Friday afternoon traffic. In one situation, the buyer client was supposed to pick up the key from a builder seller from the sales office after the deal was registered. The builder did not have the proper key available and the buyer had no access to their home over the entire long weekend.
Key pick-up is something that buyers should discuss with their lawyers in advance of closing. It is sometimes more convenient to have the buyer attend at the seller lawyer’s office to pick up the key directly at closing. Real estate agents should also consider picking up keys on behalf of their buyer clients at closing. It is my experience that those agents who provide this service find that their clients appreciate it very much. It makes one less thing to worry about on a stressful day.
Sellers must also remember to vacate the property as soon as possible on the date of closing, and to remove any junk that the buyer has not agreed to accept. Once title transfers, the seller should be out of the house. If they are not out of the house and the buyer incurs extra moving costs because of the delay, or additional costs to remove junk, they can sue the seller for any of these costs after closing.
There will be similar situations on the Fridays before holidays this year. If you can avoid closing your deals on these days, it is best to do so. Being prepared for closing can avoid a lot of unnecessary stress later.