Things moved quickly once we were under contract on the lot. When under contract with sellers for a piece of land or a house, they’ve promised to sell you a certain thing at a certain price, and you’ve promised to pay that price for that thing. The contract period allows the buyers to do their due diligence to confirm they’re actually going to get the thing they think they’re buying. If not – say, an inspection reveals an undisclosed problem – the sellers can back out and get their earnest money back. But nothing changes hands except the earnest money, held in escrow, and information, until closing.
Since the transaction was going to be in cash, we didn’t need much time for closing. Usually it’s the process of getting a loan and the bank vetting the property so they are satisfied about the security for their loan that slows down real estate transactions. Here, we weren’t using a bank, aside from actually moving the money into the title company’s escrow account.
We already had the soil survey and property survey that the sellers had done, along with the relevant HOA documents. So those deadlines came and went without much fanfare.
The soils report did have some concerning sections regarding expansive soils. The clay that made up a good chunk of the dirt on the lot expanded when it got wet, which makes building foundations more complicated. Since if you don’t account for the soil expansion, you can start cracking slabs and moving parts of your house independent of other parts of your house. Shaun confirmed that it would add some expense, but nothing too dramatic, and nothing real out of character compared to other lots in the area.
The Tap Fee Payment
One wrinkle cropped up when we tried to assess the situation with the property’s tap fees – fees charged to connect our lot to water and sewer lines. The listing stated that $7,000 had been prepaid towards sewer and water taps. The terms of our offer required the sellers to provide proof of that payment by a certain date.
The sellers’ agent sent us an email chain between the listing agent and the HOA, where the HOA’s bookkeeper confirmed that yes, each lot enjoyed a $7,000 “credit” towards sewer and tap fees.
We checked our contract. We checked the emails. In our minds, saying that the sellers “pre-paid” something wasn’t the same as the lot enjoying a $7,000 “credit,” particularly when all of the lots in the development enjoyed the same credit. We had evaluated this lot as being $7,000 more valuable than some of the comps in the same development due to the prepayment. I called the listing agent and told her as much, offering to split the difference and let the issue go if the sellers shaved $3k off the final price. She said she would take it to the sellers, but she didn’t sound convinced that a “credit” and a “pre-payment” were different things.
The next day, the sellers told us to pound sand, complaining that they had come down as far as they had to avoid issues just like this one. Now, had we wanted to pick a fight, we could have gone through with the closing and then turned around and sued the sellers for specific performance of our contract, which required a $7,000 pre-payment of sewer and tap fees, and proof of the same. I was somewhat worked up about the issue and seriously considered it, but my wife, firmly and gently, informed me that we weren’t going to poison this thing with litigation. So we shrugged and moved forward towards closing.
The only other minor issue cropped up when we reviewed the title commitment. A title commitment is basically a promise that the title company will deliver you ownership of the land, subject only to a discrete list of exceptions. For example, a common exception is a utility easement, so the title company is saying “we’re delivering to you title to the whole land, except for the ability to build in this strip that overlays a natural gas pipeline.” Most of those exceptions are HOA covenants, utilities, and maybe a mortgage the sellers are carrying. Our commitment came with an exception for a restrictive agreement limiting short-term rentals. But the problem was that it was for an entirely different piece of land; not ours. We contacted the title company about it and they removed it.
With that settled, we were ready to close.