One thing we have in common in real estate—whether it’s investment, commercial, or residential—is that the process of closing sale is called a pending sale. This is the time period after the buyer and seller have met on paper and set the terms that they’re going to proceed with to hopefully close the sale. Bob Nelson, Eugene real estate investment broker with Pacwest Real Estate Investments and Marcia Edwards, Eugene residential broker with Windermere Real Estate, continue to break down the process of a successful closing in part two of this five-part series.
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At this point buyer and seller have agreed on pricing, terms, and what steps need to be taken before the buyer is willing to close the home or the properties and take it off the market for other buyers. The intent is, in good faith, to proceed forward.
The Scope of Due Diligence
The touchy part comes when the buyer has perceived issues about the property without necessarily being able to get in, roll up their sleeves, and prove those issues—or opportunities—are present. That is all part of the due diligence process.
The financial side is also a part of this process to ensure that tenants are paying what was represented in a general sort of way, and that the return on investment the buyer is anticipating is truly there. Title insurance is another aspect of this. Discovering whether there are attachments to a property, like an obligation to pay property tax, is critical. This issue doesn’t reveal itself when you view the property, but it will show up in county records.
When you uncover issues with the title or the property itself, then you’re likely to call for some adjustments. The seller usually doesn’t want to hear this, but it’s all a part of the process.
As a buyer, you’ll see a preliminary property report, which lists attachments to that property. This offers the opportunity to clarify what will be removed at close of escrow. For instance, you won’t have the mortgage on the property that the current owner has; that will be paid off at close of escrow. But other things, such as easements or the obligation of property taxes, will remain attached to the property, and you want to take a good look at that. That’s part of your due diligence.
Bob Nelson, Eugene Commercial Real Estate Investment Broker:
At closing, if the property taxes are in arrears, that is taken out of the seller’s proceeds, the property taxes are brought current, and the situation is resolved. The issues that are touchy, such as easements that are in a bad place, likely can’t be resolved.
The Pending to Closed Sales Successfully Series is from the Bob Nelson and Marcia Edwards “Real Estate Today ” Eugene, Oregon, radio show, which airs at 5:30 daily on KPNW.