Real Estate Investor Loan Delays | 7 Closing Problems

EXPEDITED CAPITAL FUNDING | REAL ESTATE INVESTOR FINANCING

Why Real Estate Investor Loans Get Delayed: 7 Problems That Can Hold Up Your Closing

A financing delay can put an entire real estate investment at risk. The earlier an investor identifies potential problems, the easier it is to keep the transaction moving toward closing.

When a real estate investor gets a property under contract, the clock starts immediately.

There may be inspection deadlines, appraisal deadlines, financing contingencies, seller expectations, extension dates and a closing date that cannot simply be ignored.

That is why financing delays can become expensive very quickly.

Some delays come from the lender. Others come from the property, title, appraisal, borrower documentation or a change in the transaction itself.

The goal is not simply to request financing.

The goal is to present a complete, financeable transaction that can be reviewed, structured and moved toward closing with as few unnecessary delays as possible.

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Expedited Capital Funding works with real estate investors seeking financing for fix-and-flip, bridge, DSCR, construction and other investment-property transactions.

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1. Incomplete Borrower or Property Documentation

One of the most common causes of financing delays is a file that is missing important information.

Investors should be prepared to provide the information necessary for the lender to understand the borrower, the property, the transaction and the proposed exit strategy.

Depending on the loan type, that may include items such as:

Purchase contract or transaction details

Property address and property type

Borrowing entity information

Rehab scope and budget, when applicable

Liquidity or reserve information

Borrower experience

Requested loan amount

Expected exit strategy

Sending pieces of the file over several days can slow down the review process and create unnecessary back-and-forth.

2. Appraisal or Property Value Problems

A financing structure may look workable until the appraisal comes back.

If the appraised value is lower than expected, the lender may need to restructure the transaction, reduce proceeds, request additional borrower equity or revisit the proposed leverage.

This can be particularly important for fix-and-flip transactions where the investor is relying on an estimated after-repair value, commonly referred to as ARV.

An investor's projected value and an appraiser's supported value are not always the same.

Build enough flexibility into the deal so that a valuation issue does not automatically destroy the transaction.

3. Rehab Budget Problems

For a fix-and-flip or renovation loan, the rehab budget is a critical part of underwriting.

A budget that is incomplete, unrealistic or inconsistent with the scope of work can create questions that have to be resolved before funding.

Investors should try to present a rehab budget that clearly identifies the major work being completed and the expected cost of the renovation.

If your project involves acquisition and renovation financing, visit our Fix & Flip Loans page.

4. Title, Lien or Ownership Issues

A lender cannot simply ignore problems affecting title.

Existing liens, ownership discrepancies, unresolved judgments, entity issues or other title-related matters may need to be addressed before the lender can close in the required lien position.

When possible, investors should get title work started early enough to identify problems before the closing date is only a few days away.

5. Insufficient Liquidity or Reserves

Even when a lender is financing a substantial portion of the transaction, the borrower may still need funds available for equity, closing costs, reserves, interest, construction expenses or unexpected issues.

One mistake investors make is calculating only the down payment and assuming that is the entire cash requirement.

A more complete analysis should account for the full transaction.

Know your total cash requirement before you get to closing.

Purchase equity is only one part of the capital stack.

6. LLC or Entity Documentation Problems

Many investment-property loans are made to business entities such as LLCs.

If the borrowing entity information is incomplete or inconsistent, the lender may need clarification before closing.

Investors should make sure the ownership structure, operating documents and responsible parties are clearly documented before the file reaches the final stages of underwriting.

Small administrative issues can become large closing delays when they are discovered at the last minute.

7. The Deal Changes After Underwriting Has Already Started

Real estate transactions change.

The purchase price may be renegotiated.

The rehab budget may increase.

The borrower may request a different loan amount.

The closing date may move.

The exit strategy may change.

Any material change can require the lender to re-evaluate part of the transaction.

That does not necessarily mean the deal cannot close. It means the investor should communicate changes as quickly as possible instead of waiting until the last minute.

NEED SHORT-TERM REAL ESTATE FINANCING?

Bridge Financing May Be an Option

Real estate investors sometimes need short-term capital to acquire, reposition, refinance or stabilize a property before moving into a longer-term financing structure.

EXPLORE BRIDGE LOANS

Rental Property Investors Have a Different Set of Financing Questions

Investors acquiring or refinancing income-producing rental properties may be looking for financing based primarily on the property's ability to support its debt obligations.

That is where DSCR financing may come into the conversation.

Investors interested in rental-property financing can review: ECF DSCR Loans .

How Investors Can Reduce the Risk of Financing Delays

No lender can guarantee that every transaction will close without complications.

But investors can reduce unnecessary delays by organizing the transaction before underwriting becomes urgent.

1. Send complete property and borrower information.

2. Start appraisal and title work as early as practical.

3. Prepare a realistic rehab budget and scope of work.

4. Understand the total cash requirement.

5. Make sure LLC and entity documentation is consistent.

6. Communicate material changes immediately.

7. Start financing discussions before the transaction becomes an emergency.

REAL ESTATE INVESTOR FINANCING

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Fix & Flip Loans
Bridge Loans
DSCR Loans
Ground-Up Construction Loans

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Get Your Financing File Started

If you have an investment property under contract, are preparing an acquisition, or need to refinance an existing real estate asset, submit the transaction details to Expedited Capital Funding for review.

REQUEST A LOAN QUOTE CONTACT ECF

1-833-900-FUND   |   [email protected]

Do Not Wait Until the Closing Is in Trouble

A stronger financing file begins with complete information, realistic expectations and early communication. The sooner potential issues are identified, the more time everyone has to work toward a solution.

Important: This article is for general educational and informational purposes only. Loan programs, underwriting requirements, documentation, leverage, rates, terms and availability vary by lender, borrower, property and transaction. Nothing in this article constitutes a commitment to lend or a guarantee of financing or closing.