Tag Archives: closings

Life in the Pressure Cooker–Some Suggestions for Extracting Ourselves from Ensuing Difficulties

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As real estate professionals, we are more or less used to the stress level which exists within our clientele. I am a Massachusetts real estate attorney with more than 40 years of experience. I have bought, and sold, five and four homes, respectively. In not one situation was I calm and relaxed throughout the process. it seemed that there were a million things to do, and I did not have the time, or the patience, to tackle all of them. Sometimes the lender created problems with requests for information I was sure I had already submitted. Sometimes, the walk-through did not go particularly well. In one situation I had a flooded kitchen between the time of Purchase and Sale and the closing. That caused its own set of problems.

Looking back on my own situations, and the many others I have handled for others, I have developed a few tried and true approaches to the real estate “pressure cooker”, which I would like to share with all of you, whatever part in the process you are assuming:

     1. Try to Stay Calm. Problems are going to arise, and almost always when we least expect them. Acccept the fact that there can be problems. Think about your customer first. What can you say or do to assuage the issue. I have found that the last minute inspection problem, or the lender delay, or any number of other things which can delay a closing, or worse, are best addressed by calmness. Do not let yourself get emotional about the problems. Speak with the other professionals. Try not to relay bad news to a customer without suggested approaches to a solution. Think positive thoughts; convey your sense of confidence to your customer through your calm mien.

     2. Do Not Point Fingers. Many times the approach which appears simplest to effect is to blame another person or entity for what has happened, and step away. I used to do this, because lawyers are very fat targets when there is a problem, and I wanted to stress that I had done nothing wrong, but Mr, Jones or Ms. Smith, was the true culprit. I no longer take this approach. Rarely do real estate disputes actually result in litigation. More often than not there is a solution out there which everyone can live with. If I have been solution, rather than blame, oriented, I can preserve my relationships with the professionals I will have to work with at other times, and in other places. Furthermore, I have found that coming up with a solution in a difficult situation is the thng that a lot of people remember about me, and my firm, when the smoke clears.

     3. Do Not be Afraid to Call a “Time-out”. In our profession, no one really gets paid unless and until the deal closes. Sometimes, that colors our behavior. We all have lost deals, and spent time on matters that do not produce revenue for us. On the other hand, sometimes a deal just cannot work, no matter how hard we try to push it forward. Sometimes, it can work, but the financing must be re-tooled to fit the specific situation of the Borrower. My experience has been that it is better to call a “spade a spade” early in the game than to labor relentlessy on a project where there is little, ot no, hope of success. Call “Time Out”, regroup, and go a different path.

     4. Never Sacrifice Your Integrity to Make a Transaction take place. New financing rules have severely hampered the ability of the Borrower to exaggerate assets or income, or even lie about them. In a way, that has taken some pressure off the rest of us. There are still situations which arise, however, where a half-truth or a lack of disclosure may let a deal go forward. I suggest to each of you that you do not want to be a part of any effort which involves ANY deceit or subterfuge. I mentioned above that real estate matters rarely become litigations. If they do, however, and you are called upon to testify, you want to make sure that your behavior in the matter, from an ethical standpoint, is above reproach. Deals come and deals go. Your reputation is forever.

Eliminating the Emotion–No job that we do as Real Estate Professionals is more important

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I recently wrote a Featured Post about negotiating. I stressed how important it was for people to “walk” at some point in negotiations, either before the property was placed under agreement or at the closing table.

The consistent sentiment from those of you who responded was that you worked hard in the beginning of the engagement to develop a set of expectations from your client , and then tried as heard as you could to keep  that “wish list”, if you will, in front of the client, at all stages, with the objective that  the client would not change course and start to ask for new concessions, normally late in the game.

This approach appears commendable. Almost everything in our business improves with preparation and diligence. I would suggest another important element when you are speaking with your client early in the game. Tell the client that emotions should be “left at home” while they are negotiating for their home. As much as they want the home, or want to sell the home, they need to maintain a “poker face” throughout the process.

In my experience, any  significant show of emotion by Buyer or Seller opens up the doors to the other side. A client needs to  be comfortable with his or her goals for the transaction. They may change somewhat after the home inspection. Perhaps, they need even to be put down in writing. But, I have found that we do out best for our clients if we remind them, gently but firmly, that they should not lose sight of what their goals were in the transaction and what they really expected.

Sometimes the best way to remove emotion is to remove the client. Urge your Seller not to attend the cllosing. Nothing is added by the Seller’s presence, and the chance for an emotional flare-up is increased by the Seller’s presence. The  parties do not need to like the people on the other side; they just need to accomplish what they originally set out to do, purchase, or sell, the property, on terms which they have assessed as fair. If we can keep them focused on that course, we are doing our job,

Frustrated by the Apparent Insourciance of Massachusetts Mortgage Lenders- -Make your Sales Agreements “Bulletproof”

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In the near recent past, most real estate purchases in Massachusetts had one thing in common. They closed on or before the date set for closing in the sales agreement.  The writer, a Massachusetts title attorney with more than forty years of experience, has recently seen a departure from that truism. Loans are now closing, when the Lender is ready, and that may well be after the specified date in the sales agreement.

Generally, when I have represented Buyers, I can get by this delay because I am working with fellow professionals who have been on my side of the fence in other matters, and they are sympathetic. We enter into extensions to permit delayed closings. I cannot really count on this goodwill every time I represent a Buyer. I , therefore, approach the problem frontally and insist on some protections in the sales agreement which are designed to lessen the stress when the Massachusetts Mortgage Lender insists that the loan is not “clear to close” because the third appraisal review has not been completed, and Martha is on vacation, and she will not be able to get to it until next Tuesday. (Your scheduled closing date is next Monday!!!)

So with this knowledge in hand I work hard to insure that the following provisions are in my Buyer representation sales agreements:

     1. The Mortgage Contingency Clause. I insist that the mortgage commitment be “in writing” and does not contain “any terms or conditions which are beyond the Borrower’s ability to fulfill in a reasonable time” I now am insisting that the appraisal which is the basis for the mortgage commitment “indicate a value equal to or greater than the purchase price.” The appraisal piece is becoming much more important with the new appraisal rules. I say to the other side, “Look, we all entered into deal this in good faith, but if we are wrong about the appraised value, we can not go through with the deal”. In these days, this seems to work.

     2. Delay Protection Provision. Getting a solid mortgage contingency provision helps, but it does not deal with the internal idiosyncracies concerning the understaffed Mortgage Lender. So, even after I make the mortgage contingency provision have some teeth, I  also insist on a provision as follows; “The parties agree to extend the deate of closing for a period not to exceed fifteen (15) buisiness days if the delay is caused by Buyer’s Mortgage Lender. or the Seller”.

     3. November 30, 2009. I have also recently been putting in a provision that if the Lender’s, or Seller’s delay causes the transaction not to close on or before November 30, 2009, the parties agree that the purchase price will be reduced by $8,000. This may seem harsh, but that closing cost credit would appear to be vanishing on December 1, 2009, and I want my client protected. I am not always successful in getting this provision accepted, and I do allow  the clause not to take effect if the Buyer Tax Credit is extended.

These are my suggestions. I would welcome yours. Masschuseets Mortgage Lenders are understaffed. They are working on short sales and modifications. They fail to grasp what “time is of the essence” means. We need to think ahead to protect our clients and customers.

Helping your customer purchase an REO–Some important observations which may help you walk through this minefield.

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One of the areas which my law firm, Topkins & Bevans, with offices in Boston, Waltham and Braintree, Massachusetts, has recently become extremely active is real estate owned by banks and other financial institutions after foreclosure (generally known as “REOS”). REO purchases are not for the meek, and I thought I would share with the Active Rain community some of the “issues” which almost always obtain when purchasing an REO:

     1. REO Properties are always sold “as-is”. This means that you may be able to get limited financial concessions for problems at, or around the dwelling, but virtually “never” have an REO Seller, which will fix or restore problems in the dwelling.

     2. The closing date on the REO sales agreement is rarely, if ever, the date of the actual closing. There are generally too many title issues which are lurking in the property’s history to permit an orderly closing. This can be especially troublesome for people buying an REO as their intended residence. We have seen many instances where REO Buyers are “homeless” because they have made plans to leave their prior residence for the REO property only to experience delays. Be prepared for not a lot of “human kindness” from the REO Seller even though your client is in a desperate situation.

     3. Most REO properties are handled by servicers for the investors. Accordingly, there is a rather rigid “chain of comman” which muct be adhered to and can rarely be side-stepped. This means that delay in reaching decisions is almost always a “given” and you, and your client, will be disadvanatged.

     4. Foreclosure sales are the culmination of a generally lengthy process, with many areas where terminable error can sneak in. The Internal revenue Service and state Department of Revenue must be given appropriate Notice. The foreclosure documents must be drafted correctly, or confirmatory documents will be required. Any such documents need to go up the “chain of command” and that can occasion delays. The Buyer’s attorney, or title company, will be expected to certify title. This is hard to do if the foreclosure has “flaws”. The investor Seller is rather picky about the flaws in the title. Once the investor signs off, it does not want to deal with the property again. This can definitely cause delays.

     5. If a closing cannot be scheduled in the reasonably near future, the Seller may pull the property off the market even though the Buyer wants to complete the purchase. The Seller would rather wait until the title issues are all resolved. The Seller really doesn’t care to whom the property is sold. The Seller just wants to know that once the deal is done, it is “done”, so that need for closure often drives the bus.

     6. There are some continuing issues with outstanding liens on the proeprty, most notably in the payment of overdue condominium common area fees. If the outstanding fees are in excess of certain prescribed numbers, the Seller will not permit that a HUD-1 Settlement Statement to include payments with respect to that problem. Don’t ask me why, but it can cause problems.

    7. An Owner’s Policy of Title Insurance is an absolute “must” for REO purchases. There are just too many areas where a slip-up will cause problems down the road. Some of our REO Sellers will ask our firm to write the Owner’s Policy and pay for same as their closing cost. Others are not as generous. In any event, make sure you Buyer has a Policy. That is among the best advice you can give to your REO purchaser.

The Closing Table–A Venue for Marketing!!!

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As a Massachusetts title attorney with over 40 years of closing experience, I am often shocked at the number of missed opportunities for marketing that the closing table presents. For my own part, I view the closing table as a chance to market my law firm and to provide the Buyer with an array of services my firm offers. This not only includes helping their friends and relatives with their next real estate transaction; it also includes explaining why home ownership presents a need to bring their estate plans up to speed and to make sure their insurance coverage is adequate. After all, they have just signed up for a large liability in their mortgage, and they want to make sure that if something happens to them, their home (and children) will be protected.

There are several other things I do at each closing:

     1. I always give the Buyers a small gift. Sometimes a special bottle of wine, other times an umbrella with my law firm’s name emblazoned on it.

     2. I have now taken to preparing a large loose leaf binder with the name of the Buyer and the property address. I tell the Buyer to place a copy of the HUD-1 Settlement Statement and a copy of their Owner’s Policy of Title Insurance as the initial entry into the binder. Thereafter, I advise them to place a copy of each and every invoice relating to their home into the binder. If they are diligent in doing this, they have created a wonderful marketing book for you, the real estate professional, to sell their home when that time comes. recently, I have inserted a plastic sheet for business cards. i place mine in the sheet and urge the selling broker or buyer’s agent to place theirs in the sheet, as well. I am a member of a BNI Group. I also place the cards of those BNI Members in whom I have confidence into the binder.

These are the marketing opportunities I have observed for other real estate professionals:

     !. Realtors. A realtor in attendance can often firm up future business by being at the closing and being helpful. I have seen realtors bring small gifts, as well. Many seasoned realtors also backstop suggestions I make to the Buyer, and in general serve as liaisons in the process. It is akin to bringing home the girl you brought to the dance, and the sense of closure is important.

     2. Mortgage Professionals. I am surprised at how few appearances these people make at closings. To me, this is a perfect opportunity to market only to the selling broker or Buyer’s agent who almost certainly in attendance. On many occasions, the listing agent appears, as well. Closings take an hour or so, and there is a lot of dead time for the realtors. What a great chance for a mortgage originator to make a captive sales call. He or she can answer questions, speak about new programs to people who have no choice but to listen. Maybe a new deal sprouts from this initiative!!!

Perhaps, many of you have found closings to be boring chores foisted on you by your superiors. As this post indicates, I view them quite differently, and I urge you to give some thought to some, or all, of the marketing ideas I have shared herein

The Perfect Closing-One Lawyer’s Dream

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Strangely enough, after more than forty years of doing residential closings, I cannot remember one closing which was perfect in every way. My state, Massachusetts, still has lawyer’s serving as closing agents and also reviewing the title and writing the title insurance. This means that my firm, Topkins & Bevans, is responsible for checking at the appropriate registry to make sure that the Seller really owns the property, and there are no liens which cannot be paid off, or accounted for, at the Closing. We also need to check on water and sewer charges, and other municipal liens (such as property taxes) and common area fees, where a Condominium Unit is involved. Once we receive the rest of the “figures” from the Lender, we produce a HUD-1 Settlement Statement and distribute same to the Buyer and Seller, most of the time at least 36 hours prior to the Closing

There are a lot of balls up in the air, and our job is to try to assemble all of the players, and have each of them walk away with the thought that they had been well attended to, and fairly treated. So, in a perfect world, these are the goals, which I would always try to attain in my “perfect closing”:

1. The Buyer. Buyers are almost always nervous, whether this is their first, or twenty-first, purchase. My job is to make them calmer. I do this by being prepared for each closing. The Form 1003, which is a part of the Lender’s closing package, is packed full of information. I can find out the age of the Buyers, how many kids they have, what they do, and where they work. This almost always leads to a comment like:”Oh, you are a nurse, my sister-n-law is a nurse.What is your specialty?” or “Oh, you have four children, I have four children, where are they at school?” Get the picture!!! I have identified something I have in common with the Buyers. I am a human being, too, not a robot who is there to make sure they do not purchase the home of their dreams. I tell my Buyer at the start that I will take as much time as they wish going over, and explaining, the HUD-1. I tell them that this is really the most important part of their closing. The numbers on the HUD-1 help them to establish an “opening balance sheet” for their home. I never try to rush closings; this is a big moment for the Buyers, and I want them to relish it. Whenever possible, I take a picture of the Buyers with my digital camera after the Closing and send it to them with an email. I want them to have a memory of their “big day”

2. Sellers. Sellers have feelings, too. I tell them that I will explain the HUD-1 to them as well, especially if they do not have an attorney present. I try to move the closing along so the Seller is not inconvenienced.

3. Realtors. Most realtors come to closings. I try to involve them in the proceedings as much as they wish. I will ask their opinion on certain issues, and assist them by having an extra copy of the HUD-1 available for them to take with them. Lately, I have been trying very hard to make sure that Seller’s Agent, or the Buyer’s Agent, gets paid from my Client’s Account at the closing. These people have worked as hard as the Listing Agent for their commission, and there is no reason to make them wait additional weeks to be paid.

4. Mortgage Professionals. Most of my Originators do not attend the closing. I think they should but they do not. Since they are not there, I ALWAYS call or email them after the closing is completed. I tell them just how the closing went, and if the closing went especially well, I urge them to contact the realtor(s) or Buyers to inquire. The positive reinforcement the originator receives may be helpful for future referrals.

If I can do all these things every time, my closings will be perfect.I am not there yet, but at least I know what I am shooting for. I would be interested in hearing from any of you with helpful hints as to how I can make my closings better. I used to have a slogan “my closings close”. That is an important statement, but I would rather be able to say “My closing closed, and I enjoyed they way I was treated”.

When is an Offer to Purchase a P&S? The answer, Almost Always!

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Many people that deal with real estate on a daily basis do not realize the ramifications of a signed Offer to Purchase Real Estate (the “Offer”). If the Offer meets the requirements of the Statute of Frauds, the parties intend to be bound and the other essential contract terms are present, presto, you have a Purchase and Sale Agreement or an enforceable contract to purchase real estate (“P&S”).

1 The Requirements of the Statute of Frauds:

A contract for the sale of land must be in writing and signed by the parties or an authorized agent of the parties. The parties would be the buyer and seller. Make sure the record owner of the property is signing the Offer. The property must be described so that it can be identified.

Compliance with the Statute of Frauds does not necessarily require a purchase price, a time to complete the transfer or the quality of title that has to be conveyed Inflatable Arches.

2. Intention to be Bound:

It is not sufficient to make the offer contingent upon the execution of a P&S. If the parties do not want to have the Offer become a P&S, they must include language that is similar to “this offer is intended only as a memorandum of the anticipated agreement and the parties do not intend to be bound but its terms.” The inclusion of this language may not be enough for a court to find that the Offer was a P&S but it gives you a much stronger argument.

3. Essential Contract Terms

The parties are indentified, purchase price, title condition and a closing date. In certain cases even these terms have been determined to be non-essential. Most of the Standard Offers used contain all of the essential terms and a binding agreement will be found. So if you are completing an Offer to Purchase assume it can be determined to be a P&S. If you assume this you must make sure that all of the anticipated terms of the transaction are included.

Your continued conduct and actions will also determine your ability to enforce the contract. If you do not comply with all of the terms of the offer your ability to enforce the Offer as a P&S will be significantly negatively impacted.

So before you execute that Offer make sure you have met with and discussed it with an attorney that will be representing your interests as a buyer or seller, we recommend that you contact us Topkins and Bevans.