Settlement Date and Location

Now how difficult could settlement date and possession possibly be? Just agree on the date with the seller, sign some papers, transfer the deed, grab the keys and that’s it – right? It is simple with a lot of details that explain conveyance. The seven (7) subparagraphs and 21 lines of text explain the details.

Settlement date (A) is given … and then there is a comma with the words “or before if Buyer and Seller agree.” Ok, that is pretty simple.

(B) “Settlement will occur in the county where the Property is located or in an adjacent county, during normal business hours, unless the Buyer and Seller agree otherwise.” ‘Special needs’ may arise that should be discussed as soon as known that only change the location, not business hours. Normal banking business hours are 9:00AM to 5:00PM Monday through Friday.

I encountered this problem one time with a mortgage company. Normal procedure is to send the mortgage documents and money on the day of settlement. The local mortgage salesperson never informed anyone that everything comes from the west coast. Settlement delayed until after 12:00PM for the information and money to arrive. My advise is to insure all parties (buyer, seller, title clerk and mortgage company representative) will attend and there is enough time to correspond with the mortgage company for final approvals.

There’s More Than Settlement Date!

(C) ”Seller will pay up to and including the date of settlement and Buyer will pay for all days following settlement, unless otherwise stated.” The purpose of this information is to insulate the title against any of the specified taxes and specified fees together with any other lienable items. The title company now has a record all existing taxes and municipal fees are paid, and the buyer will be liable for only future charges.

Conveyance

(D) 4 “Conveyance from the Seller will be by fee simple deed of special warranty unless otherwise stated. ” Note: “A special warranty deed is the Seller’s guarantee that the Seller received proper title when the Property was purchased and the Property was not encumbered during the time the Seller held title, except as noted in the deed.” Title company is liable to the buyer for any errors concerning the deed. Adverse Possession and Easement by Prescription may be important if someone other than the owner claims ownership or easement over a prolonged period.

Transfer Taxes

(E) ”Payment of transfer taxes will be divided equally between Buyer and Seller unless otherwise stated.” Transfer tax is a percentage of the purchase price – usually 2% - but may be higher depending on the municipality. Also, some foreclosed properties will state in the MLS that the buyer will pay all transfer taxes. If there is an assign on the agreement, there may be two transfers and therefore two transfer taxes. The title company is liable for allowing fraud if the possibility of a double transfer is in question.

Possession

(F) ”Possession is to be delivered by deed, existing keys and physical possession to a vacant Property free of debris, with all structured broom-clean, at day and time of settlement, unless Seller, before signing this Agreement, has identified in writing that the Property is subject to a lease.” This language indicates the Seller is a landlord and tenants occupy the Property. An additional meaning is that the Seller remains in the Property after settlement date. It is mortgage fraud if a lease back to the seller is a condition of sale not described for the mortgage company to know the agreement exists. Mortgage company must know of all funds exchanged between the Seller and Buyer or fraud occurs.

Property Leased?

(G) ”A leased Property is not transferred by possession but assignment of leases. Copies if the leases are to be initialed at the time the Agreement is signed. If leases are unavailable at the time of signing, use the Tenant Occupied Property Addendum. If the property is leased, the Seller agreed not to enter any new leases of lease extensions without the written consent of the Buyer. This obligation begins as of the Execution Date of the Agreement.” I advise the Buyer to check with the Seller and Tenant at the walk through for any changes on settlement date.

Return From Settlement Date To Part 1