The Value of a Great Banker/Lender

The majority of real estate deals across the country are financed. So, obviously, banks are extremely important to the success of most real estate transactions. As I see it, these financed deals include a buyer, a seller and a critical third party – your lender or bank. Unfortunately, many challenges can arise when bringing this trio together, especially if your banker is inexperienced or careless.

For example, a buyer could make an offer with an unvetted pre-approval letter. This will sabotage your deal when the underwriting department kills the transaction in the 11th hour when funding doesn’t come through. In a rush to satisfy a new client, bankers sometimes act short-sighted, even selfishly when doling out pre-approval letters that have not been carefully reviewed by underwriting.

Other challenges can arise in new development condos as certain stipulations need to be met from the bank side in reference to the building itself. For example, most banks require a certain number of units to be in contract (under escrow) or sold and closed before they can lend in the building. If the banker does not do their necessary building due diligence even before the contract is signed, it could be fatal to your deal.

Condo questionnaires can be another source of trouble in the lending process. In condo buildings, banks must have condo questionnaires filled out and submitted to underwriting. Occasionally, these questionnaires can have incorrect answers or information the bank isn’t willing to accept. Only good, invested bankers would review the questionnaire to ensure the data is accurate and the bank will lend in the building before submitting them to underwriting. I recently had a great banker from CitiBank suggest to the building involved that they should increase its insurance policy by $100,000 a year (which costs the building nothing) to garner better rates for prospective buyers looking to purchase there. Her out-of-the-box thinking and ability to identify this pitfall, not only to save the current deal but to better position the building long term, are just the qualities you need in your banker! There are so many booby traps, obstacles and challenges for this third party in your transaction to identify and overcome to save the deal. That’s why a strong banker is absolutely paramount to the process.

In New York City, there are a fair amount of cash transactions, and depending on the price point, cash deals range up to 40% of transactions. That’s great for those cash buyers because it eliminates the third party to the transaction and increases the probability of the deal closing. But the remaining buyers reliant on banks need a strong, smart and honest banker invested in completing the transaction. New York City agents tend to know two or three very good bankers. Most brokers (including yours truly) do many transactions, and we learn which bankers act faithfully to the buyer and the deal. We also become aware of those who aren’t as diligent and miss important deadlines or details. If your real estate broker suggests a banker, try them out. They’re doing so in your deal’s best interest in most cases.

And for agents, getting buyers pre-approved with a banker you trust, whether you’re on the listing or purchase side, is the best thing you can do for your clients. Bankers who come from broker referrals want the referrals to keep coming, so in most cases, they’ll personally see that the transaction gets to the closing table. If a buyer insists on using a small, unknown mortgage lender who may not have any exposure to your market, sometimes insulating the deal by getting a backup lender involved is a great solution. Or, if you’re selling a property, write into the contract that if the buyer's current, unproven lender issues a denial letter, they are obligated to apply to the broker’s recommended, vetted, go-to banker. That’s a smart way to guard against rookie or selfish bankers blowing up your deal!

Ensuring the deal is protected from the bank's perspective is a surefire way to ensure that your clients — sellers or buyers — can close the deal when a third party is involved in the transaction — the bank!