Questions That Come Up at Closing

Seller’s Note

When selling a veterinary practice, the seller can expect to receive 100% of the negotiated price of the practice at closing.  The lenders will also loan up to 80% of the negotiated/appraised real estate price, which typically leaves the seller responsible for a seller’s note covering the remaining 20% value of the real estate, if the buyer does not have the cash.

The note’s term and amortization schedule are usually identical to the lender’s real estate loan. The seller note is amortized the same number of years with the same interest rate.  The seller has the second position on the real estate after the lender.  Typically, there is a five-year balloon that requires the new owner to pay the balance of the principal in the 60th month. 

Determining Final Real Estate Price

Although the letter of intent states that the buyer is willing to pay a set amount for the real estate, the commercial real estate appraiser, a third-party vendor hired by the bank, truly determines the final value of the real estate.  The lender’s closing costs will include the appraisal fee which is a cost borne by the buyer.

Bank Accounts

Buyers and Sellers often ask who gets the money in the business bank accounts.  All checking and savings accounts are the property of the seller. The buyer is required to get a working capital loan to cover initial costs for running the practice.

Practice Inventory

Practice inventory is unexpired sellable products in stock at closing.  At closing, the asset purchase agreement allocates a specific practice inventory value to be achieved.  Sometime in the days preceding closing, the buyer requires the seller to provide an accurate count of inventory.  If the amount of inventory falls within ten percent above or below the allocation, no adjustments are usually required.  If the amount of the inventory is more than 10% below the allocated amount then the buyer will want an adjustment. If it is higher than 10% above the allocated amount then the Seller will want to be compensated for that extra inventory that may not have been included in the purchase price.



Dr. Bill Crank
Mid-Atlantic and Northeast Territory

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