We promise our clients that we are going to make their transaction as smooth as possible, but, what are we doing and how do we assure that this actually happens? After all, a painless transaction for our clients hopefully means it is a painless transaction for all those involved, including us.
Many buyers and sellers have no idea what is involved with buying and selling a home and it is our job as their representatives to provide a client with reasonable expectations of timeframes, closing costs and the process of financing a transaction. An agent should not be in this alone and this is the perfect opportunity to put together “the team.” The agent is usually the first point of contact for a buyer or seller, and they should have a group of professionals to help answer any questions that the client may have to guide the process. The team should include, but not be limited to, real estate attorneys, mortgage lenders, accountants, inspectors, contractors, and even decorators, painters, and movers.
An agent should be able to direct their client to an attorney who can not only explain the process step by step, including what is involved in their due diligence review, contract negotiation, work with lenders, and title review and clearance, but also provide estimates of closing costs. A buyer’s first idea of their final costs should not be when their attorney sends them the check instructions a day or two before closing. A buyer should have a basic estimate of their final closing costs well in advance of the closing.
In the event that a transaction is going to involve financing the agents for the buyer and seller should discuss and the parties agree on whether the offer will be contingent or non-contingent on financing. This step should occur prior to the offer being made and accepted. A buyer can also seem desirable to a seller if the buyer can provide a pre-approval letter from a lender. Pre-approval means that a buyer has gone to a lender prior to finding a property to purchase and the lender has reviewed the buyer’s financials (such as their income and credit) and provided the buyer with a maximum amount of financing for which they would qualify. Many lenders also keep an “approved buildings” list. This is a directory of buildings for which the lender has already completed its review and has approved same for lending. Knowledge that they are qualified for a loan and the fact that the lender has already approved the building may give a buyer enough comfort to make their offer non-contingent on financing, which could put them in a better position to obtain an accepted offer, especially when there may be multiple offers.
Most buyers know that they will have to fill out the “dreaded” board package, but have no idea what will be needed. This goes for clients buying both cooperative and condominium units, as many condominium waiver applications are just an onerous as cooperative board applications these days. It is beneficial for agents to familiarize themselves with the common documents that are required to be submitted as part of the application. Some of these documents will be duplicative of the information needed by a buyer’s lender for the pre-approval, such as recent tax returns, W-2s, pay stubs, and proof of the previous one to two years of rental payments. Sometimes a letter from a CPA is required to explain some of the items found on (or excluded from) a buyer’s tax return. The cooperative and condominium may also require letters of reference from multiple sources, which may be financial, personal, and professional in nature. While these letters need to be specifically directed to the board in which a buyer is applying, having people lined up to complete these reference letters ahead of time can be a tremendous time saver. The standard form cooperative contract provides that the board package must be submitted within 10 business days of the date of the fully signed contract if paying “all cash” or within three business days of the receipt of the commitment letter if applying for financing. The standard form condominium contract provides that a board application must be submitted “promptly” after the execution of the contract.
The process of buying and selling a home is meant to be exciting. For a buyer, taking care of the majority of the mortgage and board applications prior to having an accepted offer can make the process more efficient, which can hopefully make the process less stressful.
Matthew G. Melnick, Esq.
Partner
Romer Debbas LLP
275 Madison Avenue, Suite 801
New York, New York 10016
Tel: 212-888-3100
mmelnick@romerdebbas.com
www.romerdebbas.com
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