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After the Deal is Signed: 4 Barriers to Bringing a Deal to Conclusion

After the Deal is Signed: 4 Barriers to Bringing a Deal to Conclusion

There is nothing more rewarding than that moment when a deal has been concluded and the Seller and Purchaser have finally agreed on an acceptable price and terms of agreement.

But that is not the end of the deal. More and more difficulties are being experienced in bringing the deal to conclusion and effecting transfer as financial and contractual eventualities arise. In this post, we discuss some of these and give some pointers on how to handle them.

Due Diligence

Very often transactions have a suspensive clause requiring a Due Diligence period and sometimes an opportunity for application to finance.
Once the DD has been accepted and the finance approved, we normally assume that the deal is done. However, this is not always the case. This week we discuss some of the things that can go wrong:

1. Rates clearance figures

In certain instances, rates clearance can take a very long time. This is particularly true where there is a history of unaccounted or outstanding fees. If there is anything unusual about the rates accounts, expect a lengthy delay. A consultant can sometimes assist, but in the end you are in the hands of the rates department.

2. Financial distress

Insufficient funds to clear rates, bonds and levy accounts for the property can be a barrier to concluding a deal. This is not that unusual and can delay a sale for months and collapse it altogether especially without the continuous and consistent intervention by brokers. In the event of the Seller being distressed or on the verge of liquidation or insolvency, the bank may be more actively involved in the transaction than under usual circumstances. This can cause delays as usually the sale price will be lower than the overall debt on the property and this may result in write-offs on the part of the bank.

3. Disputes between sellers and purchaser’s over trivial and not so trivial matters.

Deterioration of the property – access to and vandalism of the property. The contract needs to cover all eventualities and the Broker needs to actively assist in resolving conflictual situations.

4. Release of finance by a bank

Before the consent to register is given the bondholder needs to be satisfied that all criteria have been met. Very often the agent will be involved in obtaining copies of lease agreements and various other documents to satisfy the financier.

Important steps to ensure the sale goes smoothly:

1.Ensure that the conveyancer is competent. The Seller usually appoints their conveyancing attorney. Often this is somebody the Seller trusts, but not always someone experienced in the field of Conveyancing. A competent attorney is often the difference between a successful transfer or not.

2.Ensure that the broker is actively involved in the transaction from beginning to end. One of the biggest roles of the broker is to resolve conflicting situations between the buyer and Seller who often disagree around a lot of sensitive issues pertaining to the property and pricing. The broker’s role is to negotiate and assist with detail. Brokers also need to be qualified and competent with real estate legislation.

3.For rates clearance, where necessary, use a consultant. Anything unusual can cause a delay.

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