The Importance of the Buyer Walk-through

The excitement of closing is near.  Your Buyer flies into town a day before closing with the moving van not too far behind.  They are so happy they request to conduct their walk-through the day they arrive.  Upon arriving at the home they discover that the Seller has not finished packing.  The Buyer immediately begins to rattle off several questions to you –

  •          What if the Seller is not moved out by tomorrow?
  •          Does the Seller have to be out of the house by 5:00 on the Closing date?
  •          How will a delay in closing impact my financing?
  •          Can I conduct another walk-through to see if any damage occurred while the Seller moved out?

Now that your head is spinning you (and your Buyer) immediately jump on the phone with your attorney to assist you in addressing these questions/concerns for your now disgruntled Buyer.  Your attorney explains (in the order provided above):

  • What if the Seller is not moved out by tomorrow?

Attorney response: Paragraph 4 of the Residential Contract for Sale and Purchase (“Contract”) provides that the closing will occur on a date certain.  In the event the Seller does not timely close (at no fault of Buyers) the Seller could be held in default.  Paragraph 15(b) (Seller Default) of the Contract provides the Buyer certain avenues to address the Sellers default – e.g., Buyer may elect to receive a return of Buyers Deposit, seek damages, or specific performance.  Obviously if the Buyer is unable to move in and therefore incurs expenses directly associated with the Sellers default (e.g., hotel stay, additional fees charged by movers, storage expenses, etc.) then the Seller would likely be liable to the Buyer for these damages.  However, keep in mind that a Buyer generally needs to go through the legal process to recover damages unless negotiated in advance between the parties.  The bottom line is your Buyer may be better off negotiating a closing extension and seeking to recover any damages via an addendum rather than incurring significant fees, costs, and time by filing a lawsuit.

  • Does the Seller have to be out of the house by 5:00 on the Closing date?

Attorney response: The Contract does not state that the closing has to occur by 5:00 on the Closing date.  However, Paragraph 4 of the Contract does state that “the closing of this transaction shall occur and the closing documents required to be furnished by each party pursuant to this Contract shall be delivered (“Closing“) on ________________________ (“Closing Date”), at the time established by the Closing Agent”.  Further, Paragraph 6 of the Contract states “Seller shall, at Closing, deliver occupancy and possession of the Property to Buyer.  Also, at Closing, Seller shall have removed all personal items and trash from the Property and shall deliver all keys, garage door openers, access devices, and codes, as applicable.”  In other words, if the Closing Agent sets a closing for 3:00 pm on the Closing Date the Seller not only must deliver possession of the property, but also is required to have all of their personal items and trash removed from the property at that time.

  • How will a delay in closing impact my financing?

Attorney response: The closing agent will need to call the lender right away to see what impact a closing delay will have on the lender documents.  Some lenders might be ok with the Buyer signing on the closing date with mortgage being recorded and the funds being distributed the next day.  However, some lenders may require the closing documents be modified to correct the new closing date.  The potentially bigger issue here is whether the Buyer’s rate lock will expire as a result of the closing being extended.  If the rate lock will expire and the rates have now increased the Buyer may incur further damages as a result of the Seller’s default.  How the lender reacts to the delayed closing and whether a rate lock will be impacted will ultimately dictate how the Buyer responds.

  • Can I conduct another walk-through to see if any damage occurred while the Seller moved out?

Attorney response: Paragraph 12(e) of the Contract allows you to perform a walk-though (and a follow-up walk-through) on the day prior to the Closing Date or on the Closing Date (but prior to the Closing time) to confirm that all Personal Property that are supposed to be left on the Property (as defined in Paragraph 1(d) of the Contract) are on the Property, “and to verify that the Seller has maintained the Property as required by the Maintenance Requirements (per Paragraph 11 of the Contract), has made repairs and replacements required by this Contract, and has met all other contractual obligations”.   Assuming the damage is not considered normal wear and tear (e.g., carpet is dirty, scuffs are on the wall, etc.) and the damage happened after the Effective Date then the Seller may be responsible to fix, repair, and/or replace the items damaged while moving out.   In the event the Seller wants to provide a credit to the Buyer to account for the damages and the Buyer is using a lender to close the transaction, the credits will need to be disclosed to the lender in order to make sure the Closing Disclosure is accurate.  Note that some lenders may not allow credits which will require the Seller to actually fix and/or make repairs prior to Closing.

After jumping off the phone with the Attorney you now place a call into the Listing Agent to-

  1. Determine if the Seller will be “out” on the Closing Date (by the time that the Closing Agent had already established)
  2. Determine the Seller’s plans if they cannot deliver possession on the Closing Date (by the time the Closing Agent sets)
  3. Preemptively discuss the Buyer’s anticipated damages if the Seller cannot deliver timely possession
  4. Possibly discuss provisions needed to be included in an addendum

Obviously there could be many other variables, questions, and discussions that may transpire with the fact pattern above but these appear to be the most commonly asked questions.  The biggest takeaway from this is to make sure:

  • The Seller is proactively moving out
  • The Buyer’s rate lock date is not too close to the Closing Date
  • The Seller understands that the Closing Date (at the time the Closing Agent sets) requires them to deliver possession of the Property

Most importantly, the moment an issue arises, immediately contact your attorney to discuss possible outcomes and solutions.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jamie Ebling, Esq.  jebling@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

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