Thanks so much to Keith Solomon from Solomon | Parks for this guest post! Visit their website at https://solomonparks.com.
Last week at Parks University we are talking about when a buyer gets possession of the property. The language in the contract states "Possession of the Property is to be given at closing as evidenced by delivery of warranty deed and payment of Purchase Price or as agreed in the attached and incorporated Temporary Occupancy Agreement"
The term "at Closing" was added by the forms committee for TAR this year, which makes it a little more clear, but what does the rest of that sentence mean?
In middle Tennessee, it is typical for the buyer to close with one title company and the seller with another title company – commonly known as a split closing. Those title companies are acting as agents (Not Real Estate Agents) for the buyer and seller. When the seller's title company delivers the signed warranty deed to the buyer's title company, that title company is accepting that deed as an agent for the buyer. The act of the buyer's title company accepting the warranty deed on behalf of the buyer constitutes delivery of the warranty deed.
Payment of Purchase Price is a little more vague. The contract does not state that payment of the purchase price means when the buyer pays the funds to the buyer's title company, nor does it state that payment of purchase price means when the seller receives the funds in their account. Although there have been exceptions, it has been generally accepted that once the warranty deed is delivered by the seller's title company to the buyer's title company and the buyer's title company hands the seller's title company the checks, that completes the transaction and the buyer may take possession. The addition of the language "at closing" supports that interpretation instead of waiting until the funds are in the seller's account. Most of the time it is better for the seller to receive a wire of the proceeds instead of a check, but the wire may not go out until the next business because of wire cutoff times. However, that should not change that the buyer gets possession at the time of the "swap" between title companies. The buyer's title company could issue the seller a check, so they receive it the same day as closing, but the seller's bank may place a hold on that check and it may be in the best interest of the seller to accept a wire on the following business day.
If you have a seller or buyer who wants a better definition of when possession is to be given, you should specifically state their wishes in the contract. For example, if your seller wants to be sure the buyer doesn't get possession until the funds are in the seller's account, state that in the contract or a counter offer. That way, the buyer can accept that condition and the title companies will be aware. Today, we are seeing more and more contracts with possession given before or after closing and that is acceptable as well...it allows the parties to negotiate more about when possession is given and they know exactly what to expect before they get to closing.
I hope this title tip from SolomonParks has been helpful and we look forward to seeing you at the closing table.