Everybody Loves Cash… Deals*
We all love cash transactions. Generally they are smooth and logistically easier than closings with lender financing. While there are a few issues that you as a Realtor do not have to address with a cash closing (i.e., lending), there are so many other issues that you need to make sure your client is aware of. Below are some points that you want to make sure you have addressed with your buyer (although the closing attorney should be addressing many of them at the closing).
Homeowner’s and Flood Insurance
We all know that most lenders require homeowner’s and flood insurance to be bound prior to closing. But when there isn’t a loan involved, you must advise your client to obtain it. Obviously he or she is not required to purchase it, but you want to ensure you at least have something in your file showing that you brought the issue to his or her attention prior to closing.
Property Tax Bills
As most of you know, the taxing authorities do not update their records to reflect the new owner’s name for tax purposes until the year after a property is purchased. Thus, a new buyer will not receive tax bills directly from the taxing authority the year he or she purchases the property. You need to remind the buyer that he or she will need to get his or her tax bill(s) online from the taxing authority’s website and pay any outstanding taxes for the remainder of the year. If you do not remind them, you may get a call from an unhappy buyer in January of the following year. The call will go something like this: “I just received a notice from the taxing authority saying that I didn’t pay my taxes and that I now have to pay a penalty and interest. Why didn’t you remind me?!?” This is not an issue when your client is escrowing his or her taxes, but on a cash transaction you must pass this information on to your buyer.
Homestead Exemption
Generally the closing attorney mentions the Homestead Exemption to the buyer at closing. Many cash purchasers, however, do not attend closing. If your client does not attend the closing please make sure you either explain the exemption to them or remind them to contact the closing attorney’s office to obtain the information.
Southside Fire
For those folks purchasing property in unincorporated Chatham County (meaning not in the City of Savannah, Pooler, Garden City, Port Wentworth, Tybee or Isle of Hope), you do not have fire protection through the City of Savannah. Instead, you must sign up for fire protection through Southside Fire. Please send your client a Southside Fire application and remind them to submit the form within a week or so after closing. This applies to any purchasers (not just cash buyers).
Appraisal
While use of a financing/appraisal contingency exhibit is the norm for purchasers buying a home with lender financing, use of an appraisal contingency exhibit is not necessarily standard for cash purchase. Often a cash buyer does not feel the need to have an appraisal done. In that case, my recommendation would be to make sure you have an email confirmation in your file showing that you recommended an appraisal. Obviously this needs to be done before submitting the offer as you would want to include said exhibit in the offer if your client plans on having an appraisal conducted.
Lot Purchases
Many times lot purchases are cash transactions. You must make sure that your client feels comfortable prior to the expiration of due diligence that he or she can construct what they intend to build on the property. This is the time to email your client and recommend a survey, soil testing, confirm zoning guidelines, etc. Even if your client decides not to have some of these services performed, at least you have something in writing demonstrating that you gave them proper advice. Also, while there may not be a home constructed on the property you should recommend that he or she contacts his or her homeowner’s insurance company to obtain premises liability insurance. If there is no insurance and someone is injured on the property your client is exposed.
I hope the information was helpful and will assist you the next time you work with a cash buyer.
* Well maybe not lenders.
As always, if you need help with anything at all, please do not hesitate to contact me anytime at (912) 484-1996 (even nights and weekends) or email me at jgerber@brannenlaw.com.