1718 Harvard St, NW living room
In yesterday's post, the house on Harvard St, NW hadn't closed although it's been under contract for months. I speculated there might be lender or tenant problems and that's why the closing had been delayed. These days, getting a deal to closing is the hardest part of any real estate transaction.
The recent article in the Huffington Post "Can a dying deal be saved?"
also focuses on this problem. Although the author concentrates on the market in NY, many of his points apply to any real estate market.
1. Don't be surprised about how much paperwork is needed for your loan. Underwriting these days is no joke. More than likely, there are going to be some "conditions" on the loan that are going to cause a major panic. For example, previous clients had been pre-qualified by several different lenders, including some of the big boxes. We found a place, it was under contract, and then WHAM. The bank started giving us problems with one of the sources of income. Although my client worked for the Federal Government, it was through a contractor. This contractor was considered a "temporary employer." If you work for a temporary employer, you have to work with them for three years for your loan to be approved. My client had been with the contractor for close to a year. So much for those pre-qualification letters. This caused all sorts of problems. We had to find a new lender, do another appraisal, and scramble for paperwork mid deal. We did close but it was an awful experience for my clients.
2. If you're buying a condo or coop, make sure the building doesn't have a high investor ratio before you write a contract. Having a high investor ratio wreaks havoc on your interest rate and your down payment. The interest rate and down payment will be higher. Also, make sure the building meets Fannie and Freddie's guidelines. They're ever-changing. If the building doesn't meet their guidelines, your loan won't be funded.
3. If there are tenants, make sure the listing agent is following the TOPA laws. Has the listing agent given the first right of refusal? When? Has the second notice been given? Are the tenants moving out as they're supposed to if they aren't going to buy the house? If not, your closing could be delayed indefinitely.
The moral to this story: Be prepared. Be ready for headaches. Be patient.