Key Takeaways
- Closing documents should be drafted and circulated 5-7 business days before closing for thorough review.
- Verify loan documents against the commitment letter for rate, amount, prepayment, and reserve terms.
- The deed legal description must match the survey and title commitment exactly—mismatches invalidate the transfer.
- Always verify wire instructions by phone to prevent wire fraud—never rely solely on emailed instructions.
Closing document preparation is a collaborative process involving the buyer, seller, their attorneys, the lender, and the title company. Errors or omissions in closing documents can delay closing, create post-closing liabilities, or invalidate the transfer. This lesson walks through the complete document preparation workflow and the critical review checkpoints.
Seller-Prepared Documents
The seller's attorney prepares several key documents. The Deed (warranty or special warranty) must contain the correct legal description, proper grantor identification, and appropriate vesting for the buyer's entity. The Bill of Sale transfers personal property (appliances, maintenance equipment, furniture) included in the purchase. The Assignment of Leases transfers the seller's interest in all tenant leases to the buyer. The Tenant Notification Letters inform tenants of the ownership change and new rent payment instructions. The FIRPTA Affidavit (or withholding certificate) certifies the seller's tax status under the Foreign Investment in Real Property Tax Act. The Seller's Affidavit certifies no undisclosed liens, no pending litigation, and no facts that would affect title. These documents should be drafted and circulated for review at least 5-7 business days before closing.
Buyer and Lender Documents
The buyer executes lender-prepared loan documents including the promissory note, deed of trust (or mortgage), loan agreement, and guaranty (if applicable). The buyer's attorney reviews these documents against the loan commitment to confirm terms match: interest rate, loan amount, prepayment provisions, reserve requirements, and reporting obligations. The buyer also executes the settlement statement, entity formation documents (if closing in a new entity), and any operating agreements or assignments of interest. Critical review points: verify the loan amount matches the commitment, confirm the interest rate and amortization schedule, check prepayment penalty provisions, and ensure reserve escrows match the commitment.
Pre-Closing Document Review Checklist
A systematic document review prevents closing day surprises. Verify: (1) deed legal description matches the survey and title commitment, (2) buyer entity name is consistent across all documents, (3) loan terms match the commitment letter, (4) settlement statement calculations are correct and match the title commitment requirements, (5) all seller obligations under the purchase agreement have been satisfied, (6) tenant estoppel certificates have been received and reviewed, (7) property tax and rent prorations are calculated correctly, (8) all required insurance certificates are in place, (9) entity authorization documents are executed and delivered, and (10) wire instructions are verified by phone (never solely by email due to wire fraud risk). This checklist should be completed 2-3 business days before closing to allow time for corrections.
Timeline Milestones
Closing documents should be drafted and circulated 5-7 business days before closing for thorough review.
Verify loan documents against the commitment letter for rate, amount, prepayment, and reserve terms.
The deed legal description must match the survey and title commitment exactly—mismatches invalidate the transfer.
Always verify wire instructions by phone to prevent wire fraud—never rely solely on emailed instructions.
Sources
- ALTA — Closing Document Standards(2025-01-15)
- CCIM Institute — Post-Closing Transition Best Practices(2025-01-15)
Common Mistakes to Avoid
Not reviewing closing documents until the morning of closing
Consequence: Errors discovered day-of can delay closing, requiring corrective documents that take days to prepare
Correction: Review all closing documents 3-5 days before closing to allow time for corrections and resolve any discrepancies
Forgetting to notify tenants of new ownership and updated payment instructions
Consequence: Tenants continue paying the previous owner, creating collection delays and potential legal issues
Correction: Send tenant notification letters with new payment instructions within 24 hours of closing, as required by state law
Test Your Knowledge
1.What documents does the seller typically prepare for closing?
2.What post-closing checklist items should be completed within 30 days?
3.What is the purpose of a closing document review checklist?