“How can I make my transactions go more smoothly & avoid last minute requests?” Unlike the graphic to the left, magic and wizardry are not on my “top four” list! However, I think sometimes we all want to reach for that “magic wand” to get our real estate transactions to the finish line. Seasoned agents will sometimes say “back in the day, I gave a loan officer the contact, & told him to call me when the closing is set”. We are in very different times these days, & real estate transactions need proper management from start to finish to ensure a quality service experience for home buyers. When all is well with the world, agents, title companies, & lenders work together in a synchronized fashion to ensure that “wow” experience for buyers and sellers. Here are the top four things that a real estate professional can do to help expedite the financing part of a transaction:
- Question & investigate pre-approvals. Sadly, as important as they are, pre-approvals do not have a regulated definition. When can a lender issue a pre-approval? Frankly, whenever it feels like it. You can show a lender that you are on top of your game by calling and asking questions. Just because a lender cannot legally divulge information does not mean that you cannot make appropriate inquiries. “Does the buyer’s credit score & credit quality match the criteria for the loan applied for?” Do you have full documentation in your file regarding assets & income?” “We are looking to close on ____. Is that a reasonable date based upon your current processing time?” These questions may be especially relevant if your seller is entertaining multiple offers. Would your seller accept a slightly lower offer in exchange for a stronger pre-approval?
- Coordinate transaction details before submitting an offer. Discuss what you are seeking to accomplish for a buyer. A good lender may have more than one way to accomplish a buyer’s goals. Seller contributions toward costs should be the result of a cost estimate prepared by the lender. Different loan programs have different limitations. Plus, if you ask for excessive contributions, you may leave money on the table to the benefit of the seller.
- Be picky about your contracts. Look these over with the same critical eye as your toughest English teacher. If there is a place for initials, dates, & signatures, ensure that all are complete. Why does this matter for financing? Arguably, none of that affects the “risk” of a loan, so why do lenders get picky about this? It is all about buybacks & audits. These days, loans are approved based on the idea that the next owner of the loan, such as Fannie Mae or Freddie Mac will not ask a lender to buy back a loan due to a “defect”. Are missing initials a “defect”? One could make an argument that the answer is a firm “no”. However, those “end investors” of mortgage loans (Fannie Mae & Freddie Mac) can seek to enforce a buyback for most any technical fault…weeks, months, or even years after a closing. As a lender, we have two choices: spend time, money & resources to fight a battle over “who is right” on such an issue, OR simply exercise due diligence at the front end for the transaction. The contract document also has to be clear & legible. This really protects everyone. Many parties are making decisions based upon interpreting a contract…lenders, appraisers, title companies, & of course, buyers & sellers.
- Know the parties to the transaction. If you are working with a buyer as their agent, it is not too hard to know who the buyer is! In some cases, who the seller is may not be so clear. This seems to happen most when the seller is an investor, in some new construction scenarios, or in the case of an reo property. It is very important that the party that signs as “seller” is the party that owns the property in the first place. So if a home is owned by “Tony’s Development”, but the contract is signed by “Tony’s Elegant Subdivision”, then there is a contract inconsistency. A few years back, this would be fixed by executing two deeds at closing (double escrow). Lenders can no longer permit that practice. Lenders will check for consistency between (a) signer on the contract (b) owner as listed on the appraisal, & (c) owner of record on title. One thing that can help speed this review up is to ensure that the buyer & seller names are typed out below the signature line.
Hopefully there will be something in this article that will make a transaction move a bit more quickly for you. Please comment back if you have had particular instances of closing delays that you think may have been avoided had “someone” done something a bit differently at the beginning!
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