Closing on an Investment Property

If you have done your homework, the closing day should be fairly smooth. There are a couple of last minute details that you need to be on top of.

The 24 hour rule. All HUD-1’s must be approved by the accounting department 24 hours before closing. This means that if you want to close on Friday at 3:00, you must have the final HUD-1 approved by accounting by 3:00 Thursday afternoon. Depending on how busy your accounting department is, you should give them at least a couple of hours to review the HUD-1 after receiving it. The process only takes about 5-10 minutes, but they have other things going on so be considerate of their time. For this example, it would be wise to have the HUD-1 in their hands by 1:00 in order to get an approval by 3:00 on Thursday for your Friday closing.

The reason for this rule is to keep you from lining all the party’s schedules up only to show up to closing and find that something must be redone. This can often mean pushing back a closing to the next day. It is extremely embarrassing to be sitting at the closing table and realize that something is wrong. At best you can work it out with the attorney while the buyer and seller wait and wonder why you did not do your homework. At worst, you have to send them home and redo the paperwork for the following day.

One point of clarification, the 24 hour rule states that “all HUD-1’s must be APPROVED by the accounting department 24 hours before closing.” Several agents have made the mistake of thinking that when they received the HUD-1 or when it was faxed to the office the clock was punched for the 24 hour rule. The 24 Hour rule says nothing about when a HUD-1 is sent to an agent or when they receive it. It refers to when the accounting department has approved the HUD-1. It is the agent’s responsibility to get the HUD-1 in the hands of the accounting department for approval. That means that the agent works out with the closing attorney all the details of getting the HUD-1 in advance. It is not the duty of the accounting department to wait on HUD-1’s or to communicate back and forth with the closing attorney.

It is acceptable to have the attorney fax or email the HUD-1 directly to the accounting department, but you must be sure that they are looking for its arrival. With bills, subcontractor bids, and loans to payoff, an unexpected email from the attorney may be passed over for a couple of days before anyone notices it. Ultimately it is completely your responsibility for getting the HUD-1 approved by accounting at least 24 hours prior to closing.

Proper Identification is needed for both the Buyer and the Seller. A driver’s license is the most common form used for closings. If either party does not have a driver’s license ask the attorney what other identification will be acceptable to them.

Money. Since you made sure that the HUD-1 was approved 24 hours in advance, both parties should be aware of any money that they need to bring to closing. Title Attorneys will only take certified funds, so a personal check or cash will not be accepted. The most common form of certified funds is a certified bank check. The check should be made payable to the name of the attorney’s company or directly to the attorney. If you are unsure, always ask the attorney how he would like the check made out. Make sure to ask the attorney if your buyer or seller would like to bring any other form of certified funds such as money order. He may have specific instructions on how the funds should be handled.

Bringing Home the Paperwork. It is the agent’s responsibility to bring home all paperwork from the closing. Especially important will be a signed copy of the final HUD-1 and the check. If a real estate commission is being paid, your office will have a set standard for what paperwork you will need to bring home from the closing.

When BD or one of the owner’s is the buyer or the seller, they will not physically go to the closing. It is important that you tell this to the closing attorney in advance. The attorney will email or overnight the paperwork to the agent. It is then your responsibility to work with the “signer” to get all of the paperwork completed. That may mean forwarding the paperwork to corporate or just walking down the hall to the signer’s office. Many times a notary will be required. Make sure that the notary in the office will be available to sign off on all the paperwork.