How to avoid closing-day glitches
3. The house
is still occupied
"Another pretty common example of a closing-day glitch is that
the property simply isn't vacant," says Weinberger. It could
be that the property was previously a rental, and the tenant is
taking too long to move out. The seller might not even be responsible
for forcing the tenant out after closing.
"Depending upon the law in the state, it may
be the seller's legal obligation to deliver only the right to possession
(of the property) on the closing date, as opposed to actual physical
possession," says Weinberger. "What a shock that could
be to the buyer, who would then be responsible for getting the tenant
out of the house!"
If you're considering buying a property that currently
has a tenant, Weinberger's advice is to ask to see the lease. If there's a substantial
security deposit that the tenant would forfeit by not moving out when the lease
ends -- which would presumably be before the closing date -- the seller is less
likely to have a holdover-tenant problem.
"You can also
provide in the contract of sale that it's the seller's obligation to deliver actual,
physical possession of the property on the closing date, not just the legal right
to possess," says Weinberger.
It may be the seller, not
a tenant, who's still occupying the house at closing, particularly if the seller's
new home isn't ready. If the buyers don't need to move in right away, both parties
could negotiate an agreement under which they close on the property and the seller
rents from the new owners for a short while.
|7 closing-day glitches|
4. Unfinished repair
Sometimes a house could be undergoing repairs that are specified
in the contract but are incomplete on closing day. "It's not unusual that
sellers underestimate the length of the time it takes to complete a repair,"
says Gottlieb. "There may need to be a discussion about delaying the closing
date to enable the seller to finish any outstanding work."
If the seller waits until the last minute to address
the issue, however, the new homeowner could be in a bind.
"Buyers may have their stuff already on the moving
truck waiting outside of the house to move in," says Weinberger.
"If the buyer's financing commitment expires on closing day,
the buyer doesn't really have a whole lot of options at that point
other than to close."
In that situation, the seller could put the money
for the repairs into an escrow account to be paid after the work
"The escrow funds could be held by one of the
brokers, the title company that's conducting the closing or anybody
other than the seller," says Gottlieb. The seller may also
choose to offer the buyer a credit in the amount of the repair.
New liens on the property
When an offer on a house is accepted, a
title search usually occurs within the first couple of weeks to make sure a mechanic's
lien isn't on the property -- that is, a claim for unpaid work that was done on
the property. Just because the initial title search comes up clean does not mean
a lien couldn't be placed on the property right before closing.