Before the closing of a residential real property takes place, numerous steps need to be taken in order to prevent undesirable results and consequences after closing. The first step is normally the inspection of the property to ascertain its physical condition. Even if the contract is an AS IS contract, the buyer may try to negotiate a credit or repair to the property before the end of the period allowed for the physical inspection of the property and withdrawal of the buyer from the contract. This step in itself may represent hundreds, even thousands of dollars to the parties.
The residential real property should also be checked for open or expired building permits and for code violations. Failure to do so will result in the buyer assuming the responsibility to close open or expired building permits and code violations. The title of the property must be searched for government liens, mechanics liens, outstanding mortgages, judgments and other matters of record. A title insurance policy should be issued with as few exceptions as possible. If your attorney is not issuing your owner’s title policy, it is very important that he review the title commitment (similar to a binder in casualty insurance) and the title policy to prevent that unnecessary or adverse exceptions be included in your policy. If you are taking a mortgage to purchase the property, the bank must be issued a lender’s title policy in order for the bank to lend you the mortgage. Finally, if the property being purchased is not a condominium, then a survey may need to be prepared to determine that there are encroachments affecting the property.
In the case of a commercial real property, all of the above steps should be carefully undertaken, and in addition, a review of all leases, restrictive covenants and other matters specific to the property should be reviewed.
Finally, if the seller is not a resident or citizen of the United States, the Foreign Investment in Real Property Tax Act (FIRPTA) requires the buyer to withhold part of the proceeds of the sale to the Internal Revenue Service. A representation by a real property lawyer is of outmost importance to prevent undesirable fines and expenses for failure to timely withhold and forward these proceeds to the government.