Real Estate Transaction Checklist

 

A. LETTERS OF INTENT:

    1.  Include deadlines. (Address security deposits/who is responsible for Real Property Transfer Tax)

    2.  LOI allows you to get financing lined-up.

    3.  Since it is so easy to have a contract, might as well include details since court is likely to find the LOI is a

         contract even though it states not binding.

 

B. PURCHASE AGREEMENT:

1. GENERAL:

a. Don’t make first draft so one-sided.

b.  Look at the project yourself.

c. Determine who which party is to set-up signature block the correct way.

d. Is it a buyer/nominee/assign?  Seller may not want the property flipped.  Some Sellers may want to know who the

    assignee is.

 e. Nevada Title, Stewart Title Chicago Title and FATCO are preferred title companies.

 

2. DEPOSITS:

a. Performance deed of trust?

b. Need to be careful in that lost Earnest Money Deposit is a penalty.

c. Do not put up full amount of Earnest Money Deposit until after expiration of due diligence period.

d. Direct title company to put deposit in an interest bearing account.

e. Notice of termination required vs. automatic termination if no notice of going forward.

 

3. DUE DILIGENCE:

a. In general, period during which Buyer trying to line-up financing.

b. What is reasonable?

c. Access to property.

       i. If they go onto property should have a policy in with Seller as additional insured.

     ii. If have tenants, don’t give free/unlimited access to Seller directly with tenants.

d. Document Review

      i. Seller should identify which documents are being provided (“due diligence documents”).

     ii. Buyer should provide any non-proprietary documents developed during the due diligence period.

 

4. AS IS PURCHASE:

a. Won’t protect you if you make representations about lease/ provide information which is inaccurate.  This language

    doesn’t protect Seller.

 b. Dangerous to make representations about zoning/ use of property.


5. GRANT BARGAIN & SALE DEED:

a. Two (2) representations. 1) no encumbrances by Seller; and, 2) haven’t sold to anyone else.

b. Not a warranty deed.  Buyer needs to purchase title insurance.

 

6. REPRESENTATIONS & WARRANTIES:

a. Review carefully.

b. If selling to an alien there’s certain tax withholding responsibilities of Buyer  (“FIRPTA Certificate”).

 

7. CONDITIONS TO CLOSING:

a. Are they set up as conditions precedent.

 

8. ESCROW AND CLOSING:

a. Identify the actual closing date and time.

b. Define “closing” when documents record.

c. Need to be aware of federal wire deadlines.  Wiring money out usually must be done by 1:00 p.m. PST.

d. If the funds are coming from outside the U.S., get them in early.  Set-up separate.

e. Closing date delay.

 

9. PRORATIONS AND CLOSING COSTS:

a. Allocate security deposits.  Usually handled as a deduction of purchase price.

b. Need to calculate collection of delinquent rents.

c. Buyer’s should have business license in place before the closing.  Usually 60 days.

d. Escrow fees are typically split 50/50.

e. RPTT negotiated.  Common to have it split between the parties.

f. Seller pays for CLTA portion and Buyer pays for ALTA plus any endorsements wanted. Generally record. They get an

   ALTA policy.  It provides heightened coverage, 25-50% higher cost.

     i. ALTA without survey (should be obtained).

    ii. Extended Policy.  Insures property with a survey.  This is more expensive because of the cost of the survey.

g. For residential policy a CLTA policy is generally all that’s being obtained and is usually ok.

 

10. BROKERS:

a. Identify brokers involved and who pays the commissions or indicate they are to be paid pursuant to a separate

    agreement.

 

11. COMPENSATION:

a. NRS 113 addresses risk of loss.

 

12. DEFAULTS AND REMEDIES:

a. Seller should limit damages to specific performance or damages, not both.

b. Liquidated damages should be bold and initialed by both parties.  California requires, Nevada does not.

 

13. MISCELLANEOUS:

a. Notice.  Should update to include emails not just registered mail.

b. 1031 Exchange Language.


C. CLOSING THE TRANSACTION:

1. BILL OF SALE = PERSONAL PROPERTY:

a. Transfer of Property.

b. Warranty of title/ free of encumbrances.

c. Reference definitions in Purchase Agreement.

d. Attach an inventory.

e. Undeveloped Land- include licenses, plans, permits etc.

 

2. ASSIGNMENT/ASSUMPTION OF LEASES:

a. Attach exhibit of each lease designated.

 

3. ASSIGNMENT OF CONTRACTS:

a. List which contracts are being assigned so Seller knows what to terminate.

 

4. INTANGIBLE PROPERTY:

a. Trade name and telephone numbers.

 

5. WATER RIGHTS:

a. May need to deal with separately.

 

6. CERTIFIED RENT ROLL:

 

7. ESTOPPEL CERTIFICATES:

a. Do not wait until last minute to request.

b. Prepare Landlord/Owner’s Certificate if can’t get tenant to sign.

c. Make sure lease agreement requires tenant to provide estoppel certificate. Seller should fill out as much of the

   certificate (and attach copies of lease) for the tenant to complete/sign.

 

8. SUBORDINATION AND NON-DISTURBANCE AGREEMENT (“SNDA”):

a. Important for financing – If ever landlord forecloses.  Tenant agrees to recognize them as the owner.

 

9. BUSINESS LICENSE:

 

10. PROPERTY MANAGEMENT AGREEMENTS:

a. Can manage own property.

 

11. TRANSFER OF DEPOSITS:

 

12. 1031 EXCHANGES:

a. If you represent the Seller, don’t touch the money.

b. Make sure client knows whether you are advising them re: tax aspects of the 1031.

c. Advise escrow company if this is part of a 1031.

 

13. ESCROW DOCUMENTS:

a. FIRPTA Certificate.

b. Commercial Owner Affidavit.  Disclose whether work has been going on at the property.

c. Indemnity Agreement – signed by Seller.  Agrees to indemnify title company for anything not recorded.

d. Entity Documents – existence/ authority.

e. Make sure insurance requirements are met.

f.  Resolution of entity that they are authorized to enter into/complete transaction.

g. Escrow Instructions.  We represent this party X and you will receive the following documents and record when they are reviewed.  Include attorneys fees in the instructions.  Who is authorized to advise escrow officer to proceed to close.  Indicate to the extent a date document is missing, the Escrow Company is permitted include/complete.  Should also indicate how prorations being handled.  Provide wire instructions if client to be wired funds.

h. Settlement Statement.  Remember to make sure the adjustments/prorations carefully.

© Copyright 2011 – 2016 Lee A. Drizin, Chtd.

 

The information presented herein is general information only and should not be considered legal advice nor should you rely solely upon this information in taking any actions regarding your matter.  While no attorney-client relationship is formed by supplying this information, please do not hesitate to contact us at (702) 798-4955 to schedule a time to discuss your particular circumstances.