By Christian Ross, Ross Law | Ross Title
“Furniture included.”
“Let’s close a few days early.”
“The seller already fixed that.”
These sound like simple statements. In a real estate transaction, each one should lead to a few more questions.
On Wednesday’s Quick Hits video, we covered a range of issues that come up regularly in our closings.
What stood out to me was how often a problem begins with something everyone assumes is too small to spend much time discussing. The furniture is just furniture. Moving closing up is good news. A repair credit means inspections are finished.
Sometimes those assumptions work out. Sometimes they become the disagreement everyone is trying to resolve the day before closing.
1. “Furniture included” deserves more thought than a number on an addendum.
There is nothing unusual about selling a furnished home. The trouble starts when the parties assign a large value to the furniture because someone thinks it will save taxes.
Before agreeing to that structure, ask: What is actually included? Is the value reasonable? Has the lender approved how the transaction is being documented? Has the buyer discussed the allocation with their tax adviser?
A buyer should also understand that money allocated to personal property generally does not become part of the buyer’s tax basis in the real estate. That allocation can matter when the property is eventually sold. The IRS explains that basis is used to determine gain or loss on a later sale.
My practical advice is simple: identify the personal property, use supportable values, and get advice before treating a furniture allocation as a tax strategy.
2. An earlier closing date can change more than everyone’s schedule.
When both parties want to close early, it is tempting to sign the extension—or, in this case, the acceleration—and celebrate.
But first, find out what is still outstanding.
Has the survey arrived? Has the buyer reviewed it? Are there unresolved title matters? Does the lender have everything needed? Are any contractual deadlines tied to the closing date?
Moving closing forward can affect the time available to review documents and raise objections. The actual contract and any amendments control, so this deserves a review before the date changes.
The same caution applies to moving in early. Before signing a pre-closing occupancy agreement, understand what it says about property condition, acceptance, and remaining contingencies.
Getting the keys sooner can be convenient. It should be an informed decision.
3. A repair agreement should tell everyone when the issue is finished.
“The seller will give the buyer a $5,000 credit for repairs.”
That tells us the amount. It may leave the most important questions unanswered.
Which repairs does the credit resolve? Is the buyer accepting the property’s condition? Is the inspection period being waived? Are any repair obligations still outstanding?
A credit should accomplish what the parties intended. If the purpose is to resolve inspection negotiations, the written agreement should say so clearly.
If the seller is performing repairs instead, be equally specific. Identify the work, who will perform it, and what documentation will be provided. An itemized contractor estimate can help establish a shared understanding of the scope.
A vague agreement may get everyone through today’s conversation while leaving tomorrow’s dispute untouched.
4. An inspection disagreement needs better information.
An inspector calls something defective. The seller disagrees. The agents begin forwarding emails explaining why their side is right.
Before that exchange gets too far, return to two questions: What does the contract require, and what do we actually know about the condition?
“Defective” can be a defined contractual term. An inspection report provides information, but the contract determines the parties’ obligations.
Sometimes a specialist provides the missing piece. An HVAC contractor, roofer, electrician, or pool professional may be able to identify the problem, explain the appropriate repair, and give an estimate.
That information often moves a transaction forward more effectively than another round of opinions.
When responding to a NABOR Buyer’s Election, make sure the response accurately documents the seller’s position. If there is disagreement about particular items, involve counsel before sending paperwork that could create uncertainty about what has been accepted.
5. Buying a tenant-occupied property means verifying the tenant’s understanding, too.
The seller provides a lease. The buyer reads it. Everyone assumes that establishes the entire arrangement.
But what if the tenant says there was a later agreement? What if rent was prepaid? What if the tenant claims a different security deposit or an unresolved repair promise?
A tenant estoppel gives the buyer an opportunity to obtain the tenant’s written confirmation of important facts before closing.
That can include the rent, deposit, lease expiration, prepaid amounts, amendments, and claimed landlord obligations.
The lease is an essential starting point. Confirming how the parties have actually been operating is another valuable step.
6. Disclosures are an opportunity to address concerns early.
I regularly hear some version of this question: “Do we really have to mention it if it was repaired?”
My practical response is to discuss the facts before deciding to leave something out. A repair does not automatically answer every disclosure question.
Florida’s residential disclosure rule addresses known facts materially affecting value that are not readily observable and are unknown to the buyer. Whether particular facts meet that standard requires attention to the circumstances.
From a transaction standpoint, clear disclosures also give the buyer a chance to ask questions, review repair records, and investigate while there is still time.
Disclosure does not guarantee that a dispute will never occur. It does create a better record of what was communicated.
Ask the next question.
The common thread in Wednesday’s discussion was the value of asking one more question before everyone moves on.
What does that allocation accomplish? What deadline changes? What does this credit resolve? Has the tenant confirmed it? Have we explained the prior repair?
Our clients do not need us to make every transaction complicated. They need us to recognize which details deserve attention.
A short conversation early in the deal can prevent a much harder conversation at closing. Watch the video for more in depth analysis on these topics and several more!
