What Happens on Closing Day
Good news, the buyer has waived conditions, negotiations are finished and all that’s left is closing day! Your house is as good as sold, right?
Not so fast. . .
This is a common misconception that I am constantly reminding people. Just because the conditions are waived does not mean it is smooth sailing from here on out.
This article will go over all the aspects of closing day and what can go wrong.
The goal is to prepare yourself for a successful sale. So let’s dive in!
The Final Walkthrough
Buyers get one last chance to inspect the property before the funds are transferred over. The final walkthrough is usually performed on closing day. However, I always instruct my clients to do it the day before in case some further negotiations are needed.
Why would negotiations be needed?
Well, everything that was agreed upon in the Agreement of Purchase and Sale (APS) needs to be delivered by the time the buyers step into the doors on their final walkthrough.
That means all the junk you said you remove from the shed better be gone.
Or, if you said you would leave the riding lawn tractor in the garage, it better be there.
If that lawn tractor isn’t there what happens?
Let’s use the example that it was agreed and written in the APS that the seller would include the lawn tractor in the purchase of the property. While performing the final walkthrough the evening prior to closing day, you notice that the lawn tractor is missing.
If you agreed on something that was not executed by the final walkthrough a whole whack of things may be put into motion.
The buyers lawyer may request a cash holdback of any amount until the lawn tractor is returned.
The buyer may walk from the deal completely, possibly getting their deposit back.
Or, the buyer lawyer and the seller lawyer can go at it with lengthy negotiations that end up costing you heaps of money.
The moral of this story is if a buyer or a seller say they are going to do something in writing, in the agreement of purchase and sale, it better get done.
Be Specific with Inclusions
I have heard of some stories within the real estate industry where agents were vague with the details of what was to be included in the agreement of purchase and sale. In the APS they simply wrote, “microwave” and “stove.”
When it came time for the buyer to do the final walkthrough, the brand new, stainless steel microwave and stove were replaced with generic and old models that were around a third of the retail cost.
Yes, the seller was being a snake in this situation. But, in order to make sure this never happens write down the model and serial numbers of the appliances and be as detailed as possible with any other inclusions.
Make sure it is all in writing in the agreement of purchase and sale.
Waiting on Banks
If the buyer walks through the property and everything seems to be in place, they will give their lawyer a call and instruct them to release the funds.
Now it turns into a waiting game.
The banks are on the hook now to deliver the funds transfer over to the seller’s lawyer.
It isn’t until those funds have been received by the seller’s lawyer when the sale will be considered SOLD.
If you booked those moving trucks for closing day and they need to be back at the shop by 5pm, you may need to buy an extra day.
In my experience it usually take the bank until around 4pm to complete the transfer. That means the buyers will not get possession of the property until then.
Understand it is a waiting game, maybe plan to move starting the following day, to ensure you have complete access to the property and are not wasting your money on movers or trucks.
Scheduling the Move
If you are moving to / from a rental or to / from another property you have purchased, scheduling may be crucial. Receiving funds from a transaction to help close another transaction is always nerve racking.
Allow time for one deal to close, giving a bit of a buffer, to make sure the other deal is able to close.
There is nothing worse than having everything in place, truck rental, movers, etc. only to have it fall apart because of a cranky buyer’s final walkthrough, or waiting on a bank.
When conditions have been waived, the deal is still not closed until the funds have been received.
A crucial last step in the transaction is closing day.
Know what to expect and what is supposed to go down to make sure your sale is successful and smooth.