Closing Day Surprises

Once upon a time, a broker was closing a sale of a condo unit. Everything went smoothly up until signing day.

The broker was direct to both the seller and the buyer. So, he prepared a one-paged offer that stated:

1. the offer price,

2. tax responsibilities, and

3. the dates for payment and execution of a Deed of Absolute Sale.

The offer was short and straightforward, and the seller accepted it.

The seller, buyer, and broker met in the unit on closing day. The buyer reviewed the documents and brought up two issues.

First, he discovered that the unit was smaller than advertised. The broker said the unit was 74 sqm, while the title stated it was 71 sqm. For this reason, he suddenly asked for a half-a-million peso discount based on the missing floor area and the zonal value of the unit.

Second, the buyer noticed that the seller took the couch out of the unit–something he expected to be included in the sale. So, he again asked for an additional discount. The seller argued that it was VERBALLY agreed upon that "personal items" would be taken out of the unit.

After some negotiations, the sale pushed through; but the buyer was disgruntled, as if he was cheated from the deal.

The story could have quickly gone the other way. So here are some lessons on how to avoid this situation.

1. Measurement - Ideally, brokers should confirm measurements provided by the seller with official documents. They could derive these either from the title or tax declaration. If the owner's reluctant to give the title for privacy reasons, you could derive this from the Association Dues billing (since the dues are based on the floor area) or the admin.

It's also common for sellers to round up the area (e.g., 43.54 to 44 sqm), so it would be best to derive the area from an official document.

Certain developers also include/exclude the floor area of the balcony/pillars from the total count, so it would be good to be aware of these differences.

2. To avoid complications on closing day, I believe all offer letters be comprehensive yet concise and should include the following details:

a. Property address

- with reference to the Title number

- and parking slot (if included in the sale)

b. Offer Price

- inclusive (or exclusive of taxes)

c. Title Condition -

- whether or not it's clean

d. Turnover Condition

- with a specific list of furniture to include/exclude

e. Payment Terms and Dates

- especially important if payments would be made in different

tranches (i.e., bank-financed purchases)

f. Option to Purchase clause

- conditions that prohibit the seller from selling to anyone else

g. Terms for Refund/Forfeiture of Earnest Money

- points to events where the seller/buyer fails to comply with

certain provisions

h. Deliverables on Certain Dates

- consisting of turnover of documents, payments, and the

property

i. Accountabilities for taxes, fees, utilities, and deposits

- delineation of who pays for what on specific milestone dates

j. Validity of offer

- to avoid where the seller would continue waiting for better

offers

In our case, our offer letter template consists of 4 pages–not too lengthy.