- Owning the Day of Closing
- November 24, 2016 | Author: Chad J. Richman
- Law Firm: McDonald Hopkins LLC - Chicago Office
Every real estate purchase and sale transaction has a closing date. In its simplest form, the closing date is the date the purchase price is paid to the seller in exchange for the deed.
When the property is conveyed, the buyer and seller apportion property expenses (property taxes generally being the largest) and property income (rental income generally being the largest). Typically, any such “prorations” are added to or deducted from the purchase price. The purpose is to economically reflect the respective periods of ownership of the property (i.e., buyer after closing and seller before closing).
But who owns the day of closing?
If the property is operating profitably, I always push for my client to “own the day of closing” (one more day of net income for my client). If the property is operating at a loss, I always push for my counterparty to “own the day of closing” (one less day of net loss for my client).
As a simple example, if the property has $3,000,000 of annual net operating income, by owning the day of closing I earn my client $8,219.18 ($3,000,000/365).
Next time you sign a purchase and sale agreement, pay attention to who owns the closing date. Focusing on the day of closing is a concrete example of how a lawyer can definitively add value.