What are some closing day best practices?

What are some closing day best practices?

The closing day is the glorious day when the parties' carefully laid plans, efforts of the REALTORS®, the brokerages, the lawyers, inspectors, appraisers, mortgage brokers and several other folks finally culminate in the payment of funds and the release of keys. The term closing day is typical, but I will consider other terms, such as possession day or completion day, interchangeable for the sake of this article. After all the excellent work to get to this point, it would be a shame to fumble at the one-yard line, so here are some key considerations when the big day finally happens, whatever you may choose to call it.

Completion day choice

1. The AREA purchase contract uses the term completion day, a negotiated date chosen and agreed upon by both the buyer and the seller. Although the parties can agree to any calendar day, problems arise when selecting certain days, and the experience can be improved by considering other options. During the negotiation, REALTORS® should take time to advise their respective parties on the completion date, in consideration of at least five criteria. If possible:
2. Don't choose a weekend or holiday – Choosing such forces the lawyers to figure out how to manage the closing process when no one is operating.
3. Avoid Mondays and Fridays – Lawyers, mortgage companies, insurance companies, and?land titles are all bogged down at the beginning and end of the week. Choose a Tuesday, Wednesday, or Thursday; delays are much less likely.
4. Avoid the?first and last week of the month. For the same reasons, closings are hectic at these times. Although it is nice and neat to close on the 31st or the 1st, it doesn't help with stress levels, and it usually isn't for any significant reason that these dates are chosen.
5. Choose a closing date with at least a?2-3 weeks' gap after the anticipated removal of conditions, especially for condos, new construction, or complex transactions. Otherwise, you can expect closing delays and likely additional costs to the client(s).
6. Don't choose the same date as the closing date on one of the parties' other transactions. For example, if the buyer sold their previous home, don't set the closing date on the same day as their previous home’s, and have them wait with a moving truck and movers that are paid by the hour. They will remember that trauma for long years…

Interim financing options

If you are scratching your head about number 5 and how to avoid overlapping closing dates, Interim financing, also known as bridge financing, is the common solution. I am not a mortgage broker, but REALTORS® should know enough about the concept of Interim financing to know when to have their clients talk to their mortgage broker about this solution for closing day headaches. Since most buyers already have a home and need the equity from that home to buy the one they are moving into, this often causes the clients to think they need to line up their dates to prevent moving twice. Interim financing allows the buyer to close on the new home a few days or weeks ahead of the closing date on the previous home to enable them to move without significant time and money pressures. The cost for interim financing varies based on circumstances, but it can be as little as a few hundred to a few thousand dollars. Generally, however, it is?significantly less than moving twice, storing, and paying interim rent.

Closing day timing

The AREA purchase contracts all hold a noon time for completion day, when the buyer is expected to pay the purchase price, and the seller is to offer vacant possession of the property unless otherwise agreed in writing. This is intended as a contractual time for the lawyers to adjust costs, not a gold-gilded guarantee that the buyer can start moving in at 12 noon on the button. If everything goes well, prepare the buyer for the likely closing situation "sometime" in the afternoon; don't have all your friends waiting to move in boxes at 11:59, or there will be a disappointment. By the time the lawyer's office opens after lunch, processes the courier-delivered trust cheques, verifies the transaction documents, and notifies the seller's brokerage, it can take time for that information to flow to the buyer, collect the keys and meet at the property. Generally, it's okay to plan for the closing on the right day, but don't hold your breath about the timing.

Key release protocol

The big event on closing day is the passing of the keys, but this, too, has some logistical challenges. In most cases, physical keys must be in hand to provide access to the property. Since these keys were last in the possession and authority of the seller’s brokerage, they need to be collected and physically transported to the property to provide access. Suppose the closing appears to be going according to plan. In that case, many sellers authorize their brokerage to release the keys to the buyer’s brokerage “in trust” before the completion day to alleviate some of the logistical obstacles; this is not a requirement of the seller and can only be done at the seller’s authorization under the strictest seriousness by the seller’s and buyer’s brokerages. The critical takeaway is that keys are only releasable once the buyer has paid the purchase price, the seller has received that money, and the seller’s lawyer communicates that the keys have been released, usually to the seller’s brokerage. At that point, the seller’s brokerage will notify the seller’s REALTOR®, who will notify the Buyer’s Realtor®, who will inform the buyer and coordinate a time to meet at the home or make?other arrangements to provide the keys to the buyer. Although it is a bit like the telephone game from pre-school, this is the usual protocol and understanding it can help avoid aggravation.

Follow-up

Because all real estate is about relationships, one key best practice for the closing day is a?follow-up after closing day. Whether the client was a buyer or a seller, checking back a few days or a week after the closing will provide?valuable insight into the client’s perspective on how things went. This will allow you to hear about issues you may be able to solve, positive testimonials you may be able to use, or, at the very least, an additional touchpoint to show you care more about the client than the transaction. Don’t discount the crucial value of this follow-up opportunity for solidifying your relationship with a client who may be a referral champion for you in the future.

Closing day for REALTORS® should not be just a period at the end of a complex transaction sentence. It will be the last thing your clients remember about their experience, for good or for bad, so it should be organized, well thought out, and purposeful to ensure the closing day is an exclamation point for the client instead and something they will want to tell their friends about.

*This information is produced for members of the Alberta Real Estate Association as best practice. The content may be time, location or situation-specific.