Preparing for the Closing

AuthorGregory M Stein - Michael D Goodwin - Morton P Fisher Jr
Preparing for the Closing
§ 7.01 The Need for a Closing
The purchase agreement and the loan commitment are executory
contracts. The parties to each of these documents promise to perform
in the future if certain conditions are met. Neither of these documents
has the effect of conveying a legal interest in property. The seller can
convey legal title to the buyer only by executing and delivering a
deed, and the buyer can mortgage its property to the lender only
by executing and delivering a mortgage. All of the negotiations so
far have been preparation for the moment when the parties deliver
these operative documents and effect the transfer they have been
planning for weeks or months.
The closing is the point at which this formal transfer of title
occurs. One reason for having a closing is to underscore the legal
significance of what is happening. In this sense, the closing replaces
the common law concept of “livery of seisin,” which required the
seller to give the buyer a ceremonial handful of dirt from the land.
Modern sellers and buyers can accomplish the same result more
conveniently by reviewing, executing, and delivering the docu-
ments at the closing.
A more important modern reason for having a closing is to
ensure that all closing conditions are met concurrently. Neither
party wishes to carry out its obligations without knowing that the
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other party will perform in return. The buyer will be unwilling to
hand over the sale proceeds to the seller if there is no way to be cer-
tain that the seller will deliver the deed, and the seller will be just
as unwilling to deliver the deed without assurance that the buyer
will pay the balance of the purchase price. By having a closing, each
party can ensure that all the others perform and that all conditions
precedent are met before anyone leaves the room with any docu-
ments or funds. Closings can be conducted without gathering all the
parties and their lawyers around a conference table,1 but all closings
should be designed to attain this legal effect.
The remainder of this chapter discusses closing preparations.
The ideal closing will proceed smoothly, with the various parties
signing documents and departing quickly and happily. The more
the lawyers prepare for the closing in advance, the more likely they
are to achieve that goal and satisfy their respective clients. Careful
preparation does not guarantee a flawless closing, but poor prepa-
ration often leads to a dreadful one.
Comment: The clear trend in real estate practice over the past several
decades has been to address up front in the purchase agreement most if
not all of the material matters that transpire at closing. Several decades
ago, it was common for purchase agreements to provide that the deeds,
assignments, and other documents to be delivered at closing would be in
“customary” or “mutually agreed upon” form. Today, the forms of these
documents are often negotiated as part of the purchase agreement and
attached to the purchase agreement as exhibits. One could speculate
that this trend is the result of several factors, including the emergence of
real estate legal practice as a national practice, as opposed to a local or
regional practice where practitioners know one another and custom and
practice is well entrenched.
§ 7.02 The Closing Checklist
The first step for the lawyer is to prepare a closing checklist. This
checklist should enumerate every item that someone must address,
prepare, or satisfy at or prior to the closing and should allocate
responsibility for attending to these items. Often, one of the lawyers
will take responsibility for preparing a closing checklist and will
distribute it to all the other parties as a means of ensuring that
everyone has agreed to the same division of labor. The fact that
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