Buying or selling a home can be one of the greatest and most stressful financial transactions a person will make. It is important to ensure that this experience is as seamless as possible for all parties involved. There is no room for last minute surprises, delay, or disappointments in these transactions, so it is critical to be proactive in resolving issues in advance. Below are a few tips in how to reduce the prospect of an “ugly closing.”  

#1: Know Your Client

There are some situations that will require additional documentation and research and the sooner those items are identified, the better. A few examples of things that you may not automatically think of but definitely want to consider in advance include:

• Is your client’s property titled in the name of a company, such as an LLC or a corporation? If the property is held in the name of a company, the closing firm is going to need verify a few things.
• They will want to confirm the entity is active and in good standing. This can be verified with the Secretary of State.
• They will require evidence of signing authority to ensure that the party who signed the contract has proper authority to sell assets on behalf of the company. The type of documentation required will depend on the type of entity.
• If the entity is an LLC, an Operating Agreement should outline the structure of the company, how it is managed, who the managers or members are and what is required for authority to bind. Many LLCs are set up without an Operating Agreement. In the event there is no existing proper documentation, an affidavit may be used if approved by title underwriters.
• If the seller is a corporation the proper documentation may be found in the form of Articles of Incorporation, By-Laws or Corporate Resolutions. This information is also important if the buyer is buying in the name of a company to ensure the party signing has the authority to bind the company to the purchase.
• Will your client be attending the closing or using a Power of Attorney (POA) to sign on their behalf? This is important to note ahead of time because they may need a POA drafted for them or they may have one already prepared that needs to be approved. Additionally, if proper signatures lines are not drafted, this detail can hold up the closing if not presented ahead of time.
• Is there an estate involved or recent probate? If the property is the product of an estate, probate documentation is going to be required for review in order to ensure proper authority for transfer. Additionally, as with POAs, proper signature lines will need to be drafted in accordance with the probate information.
• Are the parties pending a divorce? This is primarily an issue for sellers to the transaction. Typically, property should not be transferred until the divorce proceedings are final and a Settlement Agreement is available for review to ensure distribution of property is in accordance with terms.
• Is your client in an active bankruptcy? While parties in bankruptcy are able to engage in purchase and sales transactions, proper motions need to be filed with the Court and permission must be granted by Order of the Court. This can create an extreme delay if not addressed prior to the onset of the purchase or sales transaction.

Identifying these types of detailed issues early on in the transaction process can give the closing firm time to properly review documents and obtain additional information if necessary, so that the closing can proceed on time.

#2: Utilize a Clear Contract

Clear terms in the contract are key to a successful closing. The goal is for all parties to be satisfied with the terms but what happens when the terms are vague and are interpreted differently by the parties? This is how transactions end up cancelled or in litigation.  

If a special stipulation is agreed to, be sure the language provides certainty. For example, if the seller agrees to “repair the roof,” language needs to be clear to all parties about what exactly that means. The seller may consider “repair” to mean a patch job they complete themselves, while the buyer is expecting a licensed contractor to replace the damaged area. It is critical that the language be so particular that there is no room for interpretation.    

Make sure that deadlines are clear. If something is due by a particular date, include the time that it is due so there is no misunderstanding. Ensure that the client understands the terms in the contract with respect to the rights of each party so there are no surprises at the closing table.  

#3: Communicate, Communicate, Communicate

Effective communication is probably the most critical aspect to a successful real estate closing.  One of the worst things that can happen with respect to the real estate closing is an unexpected and unplanned delay or cancellation of the transaction.  

Set realistic expectations for your clients so they understand the possibilities of delays if a situation arises. All parties – the seller’s agent, the buyer’s agent – should stay in communication with the closing firm so the parties are aware of any potential delays that may arise and are afforded the opportunity to plan accordingly. Be proactive in obtaining information that may be needed to resolve delays such as title issues, lender requirements, or documentation from parties. Follow up on pending issues and communicate to all parties so everyone is on the same page and knows the most recent status.

Ultimately, the goal is for all parties to be satisfied with a closing transaction. Knowing the nuances of your client, adhering to a clear contract and having effective communication are all key to prevent delays and achieve a successful, low stress closing.  

Sarah Stitgen is an attorney with Cook & James. Sarah provides vital title knowledge and closing experience to the organization. She is exceptional at providing legal guidance and direction for her staff. Sarah loves interacting with clients and declares that in her next life, she wants to be a stand-up comedian. With her outgoing personality and extroverted zeal to make people laugh, Sarah can show you just how much fun a closing can be. She graduated from John Marshal Law School with a Doctor of Law (J.D.). From Kennesaw State University, she holds a public and social services degree as well as a master’s degree in public administration.  

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