Preparing for the Closing

• Author: Gregory M Stein - Michael D Goodwin - Morton P Fisher Jr
• Pages: 317-346

317

CHAPTER 7

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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318 CHAPTER 7

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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