Step 9: Closing the Sale

Also, title and escrow agents are looking out for their interests, not yours, and may not be used to dealing with private investors. Since they normally work with banks and conventional lenders, they may regard you with some suspicion. In addition, they may simply not understand an "unconventional" transaction outside their experience.

So, to keep them under control, just remember their clearly defined role in the closing process; their only responsibilities are to make sure that all closing documents are properly signed and that the proceeds from the sale are distributed. Legally, they can't provide advice in the accounting, financial, and legal areas. They also can't act as negotiators or mediators between the transaction parties. In effect, during the closing process, treat them with courtesy but don't let them treat you badly.

Of course, a good way to make sure the closing process is handled smoothly and effectively is to have your board-certified attorney present. This is an absolute necessity. Unless you're an attorney experienced in real estate law, never attempt to do a closing by yourself! As I stated earlier, the attorney should be experienced and knowledgeable about your state real estate laws and regulations. He or she should also understand specific foreclosure laws as well as the subject of liens, judgment liens, and other legal actions that can affect the closing process.

Below are some other important tips on closing the sale.

RESPA is a 1974 federal law that was enacted to prevent con artists from preying upon the property-buying public, and you should know its provisions. It's enforced by HUD (The Department of Housing and Urban Development). As HUD's website states:

"RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD. "

You can find out more about RESPA at http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm

In addition, RESPA allows buyers and sellers to review their HUD I Settlement Statement twenty-four hours in advance of the scheduled closing date. So, be sure to review the statement carefully to check for any errors or overcharges.

One mistake made by novice investors is the failure to double-check all documents for mistakes and/or omissions. So, before you get to the scheduled closing date, sit down and review all forms carefully-loan documents, title transfer documents, closing documents, etc. Look for mathematical errors, transposed number and letters, and mistakes in spelling or typing. Of course, your lawyer should review these documents carefully as well.

The pro rata (in proportion) method simply means that the seller and the buyer pay property taxes in proportion to an assumed 365-day year. In other words, they pay in proportion to their possession of the property for that year. Here's an example: Assume the seller of a pre-foreclosure property had a property tax bill of $2,775 and owned the property for 234 days. The seller's prorated portion of the tax is calculated as follows:

$2,775 ÷ 365 = $7.60 per day X 234 days = $1,778.40

If you were the buyer of this property, you would be responsible for the remaining amount of property taxes for that year or:

$2,775 - 1, 778.40 = $996.60

Sometimes, however, the property taxes can't be figured immediately. If that's the case, be sure to put a stipulation in the contract that any proration will be adjusted when the property tax bill is finally received.

The day before closing, have all utility meters read by the appropriate utility companies so the seller can pay his or her appropriate share. Also, remember to notify the utilities that the property is now under new ownership. That way, you won't get billed for utility services provided to the previous owner.

On closing day, walk around the property and inspect it to see if any changes have taken place that could negatively affect its value: e.g., standing water, condemnation/code violation notices, pest infestations, etc. This last-minute check can prevent any unpleasant surprises from popping up in the future.

After the signing of all papers, go to the appropriate office (county clerk, etc.) for your state and have the deed recorded. If lenders and subordinate lien holders require payment, then send them cashier's checks after recording of the deed so all transactions are complete, and you know you have the property fully in your hands.

And now that you have possession of the pre-foreclosure property, it's time for the next step-fixing it up so it has maximum appeal for potential buyers. That's the subject of the next chapter.

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