Both the buyer and seller want the closing to go smoothly. The buyer wants the keys to the house, wants a quality house, wants a house with a clear title, and wants enough cashback to be able to focus on enjoying the home. The seller wants to maximize the amount he/she gets for selling the home and wants to be reasonably assured that there won’t be any legal issues that arise after the real estate statement.
With proper preparation, many of the problems that can arise at settlement can be avoided. Experienced lawyers for both the buyers and sellers generally work with the title company to avoid or minimize the problems that can arise at the real estate settlement. Some of the many problems that can arise even with the best of planning include the following:
The home fails the pre-inspection test
Buyers should inspect the house, condo, duplex, or whatever type of home they’re considering buying before they sign the agreement of sale. The agreement of sale should also be conditioned on the right to make a final inspection before settlement. Professional home inspectors can discover many defects such as plumbing, electricity, roofing, and other defects at the inspection. If new problems appear, then estimates need to be made on the cost to repair the problem. Licensed and certified professionals should perform estimates.
Often, at settlement, the liability and cost of home repairs need to be negotiated between the lawyers for the buyers and sellers. Many times, funds are placed in escrow to cover the cost of the estimated repairs.
There are outstanding bills
Buyers should hire a title company so that a clear title can be transferred. Title clerks usually handle the settlement as well. Title companies should prepare a report in advance of the settlement closing setting forth any known problems.
A common title defect is that the seller owes creditors such as the mortgage company. There may be prior liens or judgments against the property. The title company will request payoff statements to determine the exact amount due as of the date of the settlement. The seller then normally agrees that the bills the seller owes will be paid off the top before the seller is paid.
Additional title problems
Title searches may disclose other problems such as prior claims to the property or prior estates that haven’t been resolved. Many times, for example, a widow wants to sell the family home. The title company will request that the widow and the widow’s lawyer complete all the legal requirements to show the deceased spouse properly transferred his/her interest to the widow.
There are problems with the mortgage
The mortgage company that provides the loan to the seller will have its own sets of requirements. They will require that the buyer sign numerous documents before it will agree that the title company can release the funds so the purchase can be completed.
Complications may arise if the buyer’s financial fortunes changed so that he/she no longer qualifies for the loan. For example, the buyer’s income may be less than at the time of the mortgage application due to a change in job status. The buyer’s debts may have increased.
Handling mortgage problems
If there are mortgage problems, then either arrangement will have to be made to satisfy the mortgage company or the buyer may have to breach the agreement of sale. If there is a breach due to the inability to obtain the mortgage, the buyer may lose its security deposit and suffer other damages. Buyers often seek to condition the sale on the contingency of mortgage approval.
The necessary documents are not ready
All necessary legal documents must be reviewed and ready for signature. Necessary documents typically include:
- The mortgage documents
- The deed to the home or residence
- The settlement sheet
- Federal and state regulations
Additional settlement problems
Many issues prevent the settlement from taking place or can require a postponement:
- One of the buyers or sellers may die.
- Someone may file for bankruptcy
- An accident may injure a buyer or seller
- One of the sellers or buyers my face a claim for divorce
Adjustments should be made for the utility bills and the oil in the tank. Normally, there's a pro-rata adjustment for these items at settlement.
There may be difficulty getting homeowner’s insurance which is often a condition of the mortgage.
If the property is in a flood zone, then the loan may be denied.
How experienced Florida real estate lawyers help reduce settlement problems
Skilled real property attorneys anticipate many of the problems that may arise at settlement. They’ll review the title report well in advance of settlement. They’ll work with the lawyer for the other side to negotiate any contentious issues such as home repairs. Good real estate settlements draft quality agreements of sale and work with mortgage companies well in advance of settlement. For example, many times now buyers can obtain a pre-approval of a mortgage.
Practical closing problems
Skilled lawyers will also help buyers and sellers in the following ways:
• Sellers need to make sure they have a place to live in when the sale completes
• Buyers typically should arrange to sell their prior home before moving into a new home
• The attorneys for both buyer and seller will follow-up to make sure the title company files all necessary documents such as the deed and mortgage with the local court or recording office