Key Takeaways
- Confirm core deal terms (price, prorations, deposits, deadlines) in writing to avoid preventable defaults or lost earnest money.
- Use financing and inspection contingencies to protect against low appraisals, defects, and other diligence surprises.
- Verify legal and title items (deliverables, liens, HOA balances, easements, surveys, zoning, permits) before wiring funds and closing.
Close Smarter: Avoidable Legal Traps Before Settlement
When you make legal mistakes before closing, you’re putting your entire investing career at stake.
You lose deals when you sign price, proration, and deposit terms and miss closing dates. You skip financing and inspection contingencies, so a low appraisal or hidden defect traps your earnest money.
You accept seller reps, no deliverable schedule, and you don’t clear title, lien, or HOA balances. You also ignore easements, surveys, boundaries, zoning, and permits
Then you miss CD errors, miswire funds, and close without counsel on entities or assignments, keep going for fixes.
Avoid Vague Purchase Terms in Investor Contracts
Avoid vague purchase terms in investor contracts.
You protect yourself by nailing down price mechanics, prorations, and who holds the deposit, when it turns non‑refundable, and when it’s returned. Including a strong set of contingencies in the contract can help safeguard against unexpected issues that could lead to losing earnest money.
Put closing on a calendar date, not “reasonable time,” and spell out extension steps and fees so you don’t lose earnest money to surprise delays. Replace vague standards with objective timelines so expectations are clear and defensible if a dispute arises.
Define the property precisely—legal description, fixtures, excluded items, easements, zoning, and permitted uses—so you don’t inherit a compliance problem.
Itemize deliverables like rent rolls, tenant estoppels, and title policy with deadlines and measurable performance benchmarks.
If someone misses, set clear remedies, including liquidated damages, to reduce litigation leverage and keep the deal moving.
Budgets implode when “seller to make repairs” lacks clear scope, standards, and dates.
Add Financing and Inspection Contingencies Early
Because the fastest way to lose leverage in a deal is to go “hard” on earnest money too soon, financing and inspection contingencies belong in the offer—not bolted on later.
You protect your deposit and your exit ramps by making the purchase subject to a real loan commitment, not a feel‑good prequal. Courts often read missing contingencies against you when the cancellation looks strategic.
Buyers can safeguard their earnest money deposits through well-negotiated contracts that specify clauses for refunds if approvals are not secured.
Set the financing terms you can live with—rate cap, loan type, and a realistic deadline—so a lender delay doesn’t turn into forfeited earnest money.
Pair that with appraisal coordination: if value comes in low, you can renegotiate or walk instead of overpaying to “save” the deal.
Use an inspection contingency with a defined due‑diligence window and clear rights to cancel or re-trade for material defects. In most residential deals, the inspection period is typically 7 to 14 days, so schedule inspectors immediately.
Lock in inspection scheduling up front with your general and specialty inspectors so deadlines don’t trigger a technical default.
Get Seller Reps, Warranties, and Deliverables in Writing
Contingencies protect your exit ramps during due diligence, but they don’t fix the bigger problem: informal “we’ll take care of it” promises that vanish at closing.
If you’re using an agent, make sure your written representation agreement clearly authorizes the brokerage and sets compensation and term dates.
You need seller representations, warranties, and deliverables written into the purchase agreement so you can enforce them after the wire hits. Property title scams have showcased the importance of accurate documentation to safeguard against unauthorized transactions.
Require reps on authority to sell, no undisclosed rights of first refusal, accurate rent rolls and financials, and no uncured code or environmental notices.
Push every exception into Disclosure schedules—if it’s not scheduled, it didn’t happen.
Then lock down deliverables with dates: leases and amendments, estoppels, service contracts, permits, plans, security‑deposit schedules, and a clear list of included fixtures and equipment.
I’ve seen investors lose a promised HVAC replacement because it lived only in an email thread.
Finally, set Survival periods long enough to uncover post‑closing misstatements and trigger remedies like indemnity, offsets, or escrow holds when the seller’s story changes.
Clear Title, Liens, Taxes, and HOA Balances Before Closing
Even if the property pencils out on paper, a dirty title can turn a “safe” deal into a lawsuit the moment your deed records. You can’t rely on the seller’s story; run a title search that confirms true ownership, marketability, and every recorded claim before you fund.
In North Carolina, your closing attorney typically completes this search before you ever reach the closing table.
Picture the surprise at closing:
- a judgment lien clinging to the property
- delinquent taxes that outrank other creditors
- an HOA balance or special assessment you didn’t budget
Have your closing attorney trace deeds, mortgages, and court filings, then demand Encumbrance Clearance with written releases and payoffs. It’s crucial to remain vigilant and proactive in safeguarding property against modern deed scams.
Check county records plus federal and state tax databases, and order HOA estoppels early. Clean title is what your lender underwrites, so give the search 10–14 days on assets and don’t schedule closing until every payoff posts.
Title Insurance is a safety net, not a cure-all—fix defects before you sign and record.
Verify Easements, Access, Surveys, and Boundary Lines
Before you close, make sure you really understand your access and easement rights.
A recorded utility easement or shared-driveway easement can shrink (or even wipe out) your usable building area, and “permissive” access—where you’re allowed to cross someone else’s land but don’t have a recorded right—can leave you effectively landlocked the moment a lender, appraiser, or inspector asks for proof.
Start by checking your property deed for any recorded easements before you design around assumptions. It is also crucial to be aware of the fake IDs and digital signatures being used in land fraud, which can complicate property transactions if not carefully verified.
This is also why a current boundary/ALTA survey matters. Without one, it’s easy to miss encroachments or long-standing boundary use that can turn into expensive disputes later—like a neighbor’s fence, driveway, or shed sitting over your line.
Finally, read the recorded plat notes and restrictions, not just the title commitment; plats often include quiet limits on frontage, curb cuts, drainage paths, or buildable area that don’t jump out until you’re trying to design or permit.
Next up: how to pressure-test the property’s utilities, septic/well status, and what it will actually take to build.
Easement And Access Rights
When you underwrite a deal, easements and access rights can quietly dictate what you can build, where you can drive, and whether the property even functions as an “investment” at all.
I’ve seen investors buy acreage, then learn the only entrance was a farm road.
Before closing, read the title commitment for express grants, implied rights, and utility easements in gross.
Walk the site and ask occupants and the city what’s been used for years—prescriptive access can appear overnight in litigation.
- A driveway crossing the neighbor’s pasture
- Power lines slicing through your future pad site
- A “public” road that stops short of your parcel
Do Easement Valuation in your pro forma.
Confirm assignability, maintenance duties, and Termination Mechanisms so access survives resale cleanly.
Survey And Boundary Disputes
Although the deed and the plat can look clean on paper, boundary risk lives on the ground, and a missing or stale survey can turn a “sure thing” acquisition into a fight over feet, fences, and access.
You can’t underwrite what you can’t see, so order a licensed boundary survey before closing.
If the prior survey is old, expect lost pins, moved fences, and “neighborly” driveways that can become adverse possession.
When the survey finds encroachments, gaps, or overlaps, renegotiate, demand cures, or walk.
Courts lean on certified surveys, and you don’t want to tear out improvements.
Compare survey calls to the deed and title; inconsistencies can trigger insurance exceptions and kill financing.
If a line dispute emerges, use Boundary Mediation and require Monument Preservation to keep your limits defensible.
Recorded Plat Restrictions
A clean boundary survey can still leave you exposed if the recorded plat quietly reserves easements, dedicates rights‑of‑way, or hard‑codes setbacks that shrink what you can actually build.
Before you close, pull the plat from county records and read it like a set of binding covenants that run with the land.
I’ve seen investors buy “shovel‑ready” lots, then learn a drainage easement and Vegetative buffers wiped out their Building envelopes and killed the pro forma.
Verify, in writing, what you can place where, and who maintains access.
- Utility easements that forbid foundations or require future removal
- Dedicated streets versus private road easements that shift liability to the HOA
- Setback lines, sight triangles, and stormwater tracts that limit grading
If it’s unclear, order a re‑plat.
Confirm Zoning, Permits, and Legal Use Before You Fund
If you fund a deal without confirming the zoning, you’re basically betting your exit on a guess.
Take five minutes to pull the city/county zoning map or GIS, and don’t be shy about getting it in writing—an official zoning verification letter is ideal—before your money goes hard.
Then do the same with permits.
Ask for the permit file, confirm the certificates of occupancy, and look for final inspection sign-offs.
“It was already there” won’t help if the work was never permitted and the city decides to enforce, fine, or require tear-outs.
Once zoning and permits check out, the next step is making sure the use you’re funding is actually legal and transferable, because that’s where a lot of “good deals” quietly fall apart.
Builders should also stay informed about legislative measures like Senate Bill 6, which aims to streamline permit processing by imposing strict deadlines.
Verify Zoning Classification
Before you wire earnest money, verify the property’s zoning classification and confirm the permits that actually legalize its current use, because the sign out front and the seller’s story don’t control what the municipality will enforce.
Pull the zoning map, read the ordinance, and ask planning staff how zoning overlays and future land use policies affect your plan.
Picture what you’re buying:
- A duplex in a single-family district with “grandfathered” limits
- A warehouse inside a historic overlay with added setbacks and height caps
- A corner lot where parking ratios kill your tenant’s model
Request a verification letter in writing using the parcel number and legal description.
If your use isn’t by-right, price in redesign or time, or add a contingency before closing.
Confirm Permit Status
Read inspection stages and compare them to what you see; missing framing or final sign‑offs signal hidden risk.
Ask a Municipal Liaison at the building department about open violations, TCOs, or unpermitted units.
If gaps appear, renegotiate price, require seller cures, or use escrow holdbacks.
Legalization can trigger engineering, destructive testing, and code upgrades later.
Audit the Closing Disclosure to Catch Fee and Proration Errors
You audit the CD like a litigator: compare it to the Loan Estimate and the contract, and force the numbers to reconcile.
Picture yourself scanning these hotspots before you sign:
- Origination Charges and points match the rate-lock, and any increase stays within tolerance thresholds.
- Lender credits and third‑party fees land in the right payer column, with no duplicates in Section J rollups.
- Taxes, insurance, HOA, rent, and utilities follow the right proration formulas, flow to Summaries of Transactions, and avoid sign flips.
If a fee jumps without a documented “change in circumstance,” you’ve got leverage to demand a corrected CD.
In one deal, a double-counted appraisal fee quietly added $650—until the side-by-side check caught it.
Also, confirm the CD issue date satisfies TRID’s three‑business‑day rule.
Be vigilant against deceptive mortgage practices, like misleading estimates, which have led to significant financial burdens for unsuspecting homebuyers.
Send the Right Closing Funds (Wire/Certified) on Time
Once the numbers on your Closing Disclosure reconcile, the next way investors blow up an otherwise clean closing is by sending the wrong “good funds” (or sending them late).
Title can’t record until escrow has verified, available money, so personal checks and ACH don’t cut it, and many deals require a wire when cash due exceeds $500.
Treat wiring like a checklist: confirm the title/escrow company name, account number, routing/ABA, and send only after wire verification by phone using a number you confirm—not an email reply.
Ask your bank for the 16–20 digit Fed reference number and use it for funds tracking like package tracking.
The delay in implementing the FinCEN reporting rule presents an opportunity for investment advisers to adopt digital reporting platforms that can streamline compliance and reduce costs.
Build timing into your plan.
Most wires land within one business day, but escrow processing can push it to 2–4, and some banks require a branch visit and charge up to $75.
Send early so a typo doesn’t cause a missed closing today.
Use an Attorney for Assignments, Double Closes, and Entities
Picture the closing table:
- A “no-assignment” clause you missed, killing your spread
- Back-to-back A‑to‑B and B‑to‑C timelines that don’t match, forcing a default
- An LLC with no operating agreement, turning partner profit splits into litigation
Counsel also decides when an assignment is too hot and a double close or novation is safer, then drafts seller notices, buyer acknowledgments, and escrow instructions to prevent daisy‑chain funding.
On Entity Structuring, you’ll separate wholesaling risk from long-term holds, handle BOI reporting, and keep corporate formalities tight.
Why gamble when one bad contract can invite fines, title defects, or fraud claims against you?
Understanding the new state laws reshaping real estate wholesaling is crucial to avoid penalties, and seeking legal advice ensures compliance.
Assessment
You’re not just buying a property; you’re buying its paper trail. Treat your contract, title work, zoning, and closing disclosure like a preflight checklist—skip one item, and you can crash after takeoff.
Why gamble on vague terms or missing contingencies when a single lien or HOA balance can erase your spread? Wire the right funds, document seller promises, and bring counsel for assignments or entity deals.
Close clean, then build profit with confidence every time.
