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As the late, great, Yogi Berra might have put it, when it comes to closing the sale of a New York apartment, "It ain't over til' it's over." Even when buyer, seller, board, and brokers are all bringing their A game, there's so much paperwork to wrangle that it's not uncommon for the closing process to slam to an unceremonious halt. Below, five frequent issues that come up in the closing process—and what you can do to get around them.
• Credit crunch: If you need financing, bear in mind that your lender will do one last check on your credit before the deal goes through—and if your debt-to-income ratio or FICO score has changed, the bank may balk. So, tempting though it may be to start making big purchases like furniture for your new home, experts advise holding off until the ink is dry. "I had a client once who was moving to the suburbs, and decided to buy a car," says attorney Samuel Wolf. "It killed her deal at the last minute." For now, steer clear of the car dealership—and West Elm.
• The seller suddenly wants to stay put: Whether they're dawdling on packing or dealing with a delayed closing for their next apartment, it's not uncommon for the seller to stick around longer than originally agreed upon. "Once, I showed up with a client for the final walk-through, and the seller hadn't moved out at all," Bond NY agent Stacey Max tells us. "It was like a stand-off." More typically, they'll let you know about hold-ups farther ahead of time, and if the seller needs more time than expected, both sides of the deal have the right to extend for 30 days, says Citizens Bank loan officer Rolan Shnayder. In this case, you might strike a deal that's known as a "lease-back" or a "rent-back," wherein you take ownership of the apartment as planned, and the seller is like a tenant until they leave.
A couple of things to keep in mind if you're looking to pull off this kind of deal: Max recommends getting a good lawyer to write up the deal like a standard lease, and Shnayder warns that if you've got financing, it might be a no-go: owning an apartment with a tenant in place changes your purchase from a residential to an investment property, which could change the nature of your loan altogether. Yet another way in which the market is more flexible for the all-cash crowd, unfortunately.
• The building's behind on its paperwork: While your attorney should catch most potential problems during their initial round of due diligence, there are sometimes issues with the building that crop up at the last minute. If you're buying new construction (or in a building that's undergoing extensive renovations), you'll want to make sure the Certificate of Occupancy—the document that says the city renders the building livable—is coming through on time. If construction is behind, as will happen sometimes in brand-new buildings, Wolf says that it should at least have a temporary C of O, otherwise you're putting yourself in a dicey position—even if the seller offers to put some cash in escrow. "The city could still come in and condemn the property," he explains.
On the flip side, in older buildings, sometimes the paperwork will be so long-established that it'll have disappeared altogether. "I heard recently of a building that literally didn't have its offering plan," Max says. It's not necessarily a dealbreaker, though: Max says that this type of problem would likely come up earlier on in the process, and can be worked around if the broker and lawyer can come up with that document's information—square footage of each unit, how shares are allocated, and the like—in other ways.
• Things take so long that your rate expires: "Co-op and condo deals just always take longer than they should, and it's not unusual for a buyer's mortgage or rate lock to expire," says Max. "If it's a lender who's on top of it, they'll know what day they have to extend—though there's sometimes a fee involved." However, this can only go on so long: "You get two extensions, 30 days apiece," says Shnayder. And after that, you'll have to borrow at whatever the current market rate is, even if it's gone up slightly. This doesn't mean your deal will necessarily fall apart, but it does mean your lender will have to re-disclose your loan at the new rate, meaning that your closing costs might be higher or lower than expected, and the process will be held up while the paperwork goes through.
• Your employment looks iffy: As with your credit, you don't want to make any dramatic shifts in the nature of your income until you've signed the deal, if you can help it. While sometimes deals fall apart because a buyer loses their job, EverBank's Julie Teitel notes that she once had a client decide to go on sabbatical while the deal was still in play. "They thought it wouldn't affect their financing," she says. Incorrect. Besides keeping your job, there's a more mundane logistical concern to have on your radar here: right before closing, your lender will likely do a Verification of Employment, or a call to your employer to confirm that you do, indeed, still have a job. If they happen not to be able to get a hold of anyone in time, it could cause snags. "Most buyers should be able to recommend calling a specific person at their company to verify [in this situation]," says Wolf. To that end, it doesn't hurt to have a couple contacts in mind (and have given them a heads up that your bank may be in touch) ahead of time to keep the process as smooth as possible.