December 12, 2017

If you're unprepared, closing a commercial loan can test your skills, patience, and even your mental fitness. Not only will you have to navigate through documents and regulations, you'll also have to navigate around people's emotions, especially if delays occur.

The best way to manage this process is with preparation. The more you're prepared, the less crises you'll have to manage. Thus, ask yourself: How well do you know about the process and expectations with closing a commercial loan? Whether you're a banking or real estate professional, following the tips below will help make the closing process as smooth as possible.

1. Make sure to take care of repairs before showcasing the property. 

Making repairs before showcasing a property will help the seller save money on repairs, sell the property for a higher price, and sell it faster. Why?

• You'll get better offers. A potential buyer's perceived value of a property will be higher if it's been well maintained.
• Prolonging the closing process. Before closing, the property will undergo a health and safety inspection and the seller is generally responsible for making the necessary repairs anyway.
• Higher repair costs. If you opt to instead make repairs during closing, you'll likely be requesting rush services. These come at a higher cost. 
• Losing the deal. A property not being up to code is grounds for a buyer to pull out of a real estate transaction. Even if the buyer is initially willing to make concessions, the back-and-forth process of negotiating the cost of repairs can drag on and get ugly.

Common issues to look out for are environmental problems like mold and asbestos, and fire hazards like faulty electrical wiring. However, we'd recommend consulting with a local inspection agency to determine what local codes and regulations apply to your property.

2. Prepare the proper documentation in advance.   

Aside from financial records, there may be numerous other documents parties need for closing that they may be unaware of. According to the American Bar Association (1), the documents needed for closing may include:

• the latest sales contract;
• the corporate charter to verify the corporate status to the state if the sale is by a corporation;
• a court order, if the property is being sold by a ward, a person in bankruptcy, or an estate;
• a loan assumption package, if applicable;
• photo identification of all parties;
• a county health department certificate for the septic tank. 

This is by no means an exhaustive list, so contacting an attorney early about documentation requirements is crucial to a smooth closing process. 

3. Hire a title officer to do a title search. 

If you're the buyer, doing a title search and obtaining title insurance ensures that someone doesn't later blindside you with claims the property is theirs. This would include tax collectors and relatives left out of a will. 

4. Go into the process with a calm mindset. 

As experienced attorneys will tell you, "No one expects the loan closing professional to be a psychologist, but some psychological techniques are important to the loan closing professional's mental well being, as well as that of the borrower." (2) A few psychological techniques that have proven useful are:

• Keeping expectations reasonable. Closing is a checklist process, and everyone needs to be aware of their role in checking those boxes off. 
• Actively listening to others' concerns. Instead of fighting to be heard, trying your hand at active listening is an effective way to resolve any conflict. This requires uncrossing your arms, nodding, asking appropriate questions, and waiting until someone's finished speaking until you formulate your answer.
• Taking deep breaths. Every day presents a new challenge, and one way to combat stress is by simply breathing. According to Harvard Medical School, deep breathing elicits a relaxation response. (3) If someone is causing you grief or you feel overwhelmed, try to take a 10-minute time out to just breathe and relax. Remember also that the people causing you grief are people too, and they deserve a response from you that is nothing but professional.

By following these tips, you can feel secure that you've done your research and have done everything possible to allow the closing process go smoothly. However, if you still need help with this process, consider contacting us at Lorman Education Services.

(1) K.F. Boucle, "20 Important Steps for a Real Estate Closing: An Initial Real Estate Closing Checklist for the Closing Agent." American Bar Association. 2005. Available at https://www.americanbar.org/content/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/20stepforclosing.html. 

(2) Gordon L. Gerson, Esq., "The Seven Habits of Highly Effective Loan Closing Professionals." 2001. Available at http://www.gersonlaw.com/download/real-estate-finance/loan-origination-closing/the_seven_habits_of_highly_effective_loan_closing_professionals.pdf.

(3) Harvard Medical School, "Relaxation techniques: Breath control helps quell errant stress response." Last updated March 18, 2016. Available at https://www.health.harvard.edu/mind-and-mood/relaxation-techniques-breath-control-helps-quell-errant-stress-response.