Tuesday, May 10, 2011

Four good reasons to have a closing checklist

Lawyers love checklists. They love checking little boxes and ticking off each portion of a deal as it is finished, culminating (hopefully) in the closing of a transaction.

Much as I like to chuckle about this, checklists serve very important purposes.  When I started as a real estate lawyer, I thought that my prodigious memory could handle all the details and that I didn't need to spend the time working on them.  My mentors fortunately convinced me otherwise before I fell into bad habits, and they were right. (See #2 below.) I therefore have a checklist for every commercial real estate purchase or sale or loan in which I am involved, be it one page long or more than a dozen with over 100 items.  Before you ask: yes, I have checklists for other real estate transactions, too.  I use a checklist of different sorts for leases, one that no one else I know uses.  But it works for me and keeps the deal going.  I also have my own little quirks when it comes to how I prepare and edit and work with my checklists.  I will not bore you with those details except to say again: it works for me, and I encourage you do have a system that works for you.

So why should you have a closing checklist?

1.  A good, thorough checklist is the road map of a commercial real estate transaction.  By spending the time up front and at the beginning of the deal you can see what needs to be done and budget your time accordingly. It also helps you make sure the long lead-time items are taken care of first.

2.  Without a checklist, you will inevitably forget something.  I don't care how good you are or how many deals you have done.  It will happen.  Period.  Heck, even with a checklist sometimes something will fall between the cracks because someone forgot, because you didn't know about certain requirements or because someone never told you about something.  That's why you make the big bucks, so deal with it and move on. (I speak from experience here, by the way.)

3.  A good checklist delegates responsibility.  It says what the buyer, the seller, the lender, the brokers (many lawyers often forget about them, and they shouldn't!), the title company, the attorneys and any third parties need to do to get the deal done.  Depending on the circumstances, sometimes I prepare two closing checklists: one for internal use and one to circulate among all the parties.

(Here comes the one you may not have thought about.)

4. A good closing checklist not only adds value to the deal but shows just how you are doing so!  By creating the road map, you are also showing just what you are doing, how the matters assigned to you are progressing and how close (or far) you are from getting the deal done.  A client can see this document and say, "Hey, this all makes sense.  Look at all these things we might have been scrambling for or forgotten about if Dave hadn't provided the checklist! Updating the checklist periodically is also important, in my opinion, as it shows the progress of the deal.  It also serves as a reminder to people to get their parts of the deal done so we can close, and exposes those who are not doing that.

These are by no means the only reasons to have a good closing checklist.  But they are four good ones.  If you have others, speak up.

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