Top 8 “Deal Killers” when Closing a Loan:

October 19, 2016

Closing a loan can be challenging, especially in the commercial real estate space. Sometimes the loan process gets derailed and deal stalls or dies.

If you’ve financed commercial properties, you may already be familiar with the benefits of using a full service Mortgage Banking Company when closing a loan. Barry Slatt Mortgage Company provides a “full service” approach with a team of analysts, closers, loan servicing specialists, and a full administrative staff.

I recently interviewed our Loan Closing Manager, Monica Pendergast, who has successfully closed over 1,300 loans and just over $4.4BB in total financing over the 12 years that she has worked for Barry Slatt Mortgage. Monica and I put together the following list, which represents common issues that we face while closing loans.

1. Approval and Closing Timelines – Lenders can meet tight deadlines but everyone needs to be on the same page to get it done. 3rd party reports take 2-4 weeks, and lenders still need time to review and approve those reports.

2. Insurance Coverage – Simple changes in coverage can take longer than expected due to communication delays with tenants and insurance agents. This is something to watch out for on single tenant deals as tenants may carry their own insurance and not be cooperative in working to get insurance in a form that is satisfactory to the lender. This is the most common issue that causes delays in the closing process.

3. Estoppels/SNDAs – National tenants can take in excess of 30 days to return their forms, so it is critical to get these processed right away. Don’t forget to check with the tenant and see if they have their own forms. Lenders may be able to accept the tenant forms, which will help save time.

4. Vacation Schedules – Make sure you know your partner’s travel plans at least 30 days before the scheduled closing date. This must be communicated to ALL parties, including the lender since travel plans usually mean that documents must go out earlier than they would otherwise.

5. Knowing Your Existing Lender Payoff Date – Can your loan only be paid off on a specific day of the month? Does the existing lender require a minimum advanced notice to prepare the payoff statement? When refinancing, make sure you carefully read over your existing Note to make sure the existing lender does not have restrictions on when and how your loan can be paid off.

6. Incorrect or Unclear Communication About Ownership Structures – Be clear about how you intend to take title.  Is there a Trust or an LLC involved?  Even a single member entity requires the proper documentation and this can take time.  Avoid any confusion by discussing this early in the process. Make sure the entity is clear to the lender.

7. Weather Delays – It’s rare but even weather delays (especially on the east coast) can bring a deal to a halt. Winter storms can shut down offices, delay travel and signing appointments, even delay mail shipments for critical signed documents. There’s not much you can do when it happens, but it’s a good reminder to plan ahead and keep the process moving as quickly in the beginning to leave as much time as possible as closing approaches.

8. Entity Registration Requirements and Documentation – Know what your lender requires with regards to your LLC or partnership, especially for out-of-state properties.  Many lenders require the entity to register as a foreign entity in the state that the property is located in and this often comes as a surprise.

written by:

Andrew MacLeod
Commercial Mortgage Banker