The Fifteen Minute Co-op Closing
May 3, 2010
Now That I Have Your Attention...
Maybe a fifteen minute closing is a bit too optimistic, but there is no reason why a closing should take more than one hour, and in most cases, it should probably take less. Those of us who attend closings on a regular basis know all too well how much time is wasted at closings and how inefficient the process can be. Condo closings are already somewhat streamlined, as the managing agent does not attend the closing, but that’s clearly not the case with co-op transactions.
Here are five steps that can be taken to streamline co-op closings and to bring closings into the digital age.
One: Execute Documents Prior to Closing
The primary time waster at closings is the massive amount of documents that the parties are required to sign. Each managing agent and each lending institution has a slightly different set of documents, so there is no uniformity in the documents that are required for each closing. Getting managing agents or banks to formulate a standard set of closing documents would be the equivalent of herding cats, so let’s not go there for the moment.
What Can be Done
Except for the documents that relate to the actual transfer of title (the stock and lease for a co-op), the creation of the loan (the promissory note and security document), and the New York City and New York State transfer tax documents, all other documents should be executed prior to the actual closing. All non-material transfer and loan documents should be completed as a part of the application process for the purchase of the apartment and the underwriting process with respect to financing. This pre-closing exercise would also allow the attorney for each party to explain the documents to his or her respective clients prior to the closing so that the page by page discussion of the documents at closing can be eliminated. Only in New York City, in the vast majority of cases, is the HUD Settlement Statement (the summary document prepared by the bank’s attorney) not presented until the parties are sitting at the closing table. Like other jurisdictions, the HUD should be prepared and approved in advance. Implementing preparation and pre-approval of the HUD will save at least 30 minutes at every closing.
Two: Schedule Closings with Financing in the Afternoon
In today’s world, banks like to fund residential loans on the morning of the closing. That requires the bank’s attorney to obtain official bank checks after the funds have arrived. When closings are scheduled in the morning, parties often wait at the closing table for the bank funds to “hit” the account of the bank’s attorney, so the attorney can process the checks. For that reason, closings with bank financing should not be scheduled before 1 p.m., in order to give the bank’s attorney sufficient time to collect the checks and attend the closing when scheduled. All of us have sat through a three-hour closing, two hours of which were expended waiting for the bank’s funds to show up. This mind numbing waste of time can and should be avoided whenever possible.
Three: To the Greatest Extent Possible, Resolve All Economic Issues Prior to Closing
With some degree of regularity, there are charges posted to the seller’s account with the co-op, with which the seller takes issue. In most cases, those charges are known in advance and such disagreements are resolvable in advance. If the seller has an issue with a late fee, repair charge, assessment or other expense that has nothing to do with the closing, those matters should be completed before closing. Of course, if a new charge is posted to the account and the seller has no choice but to review that expense at closing, the other parties will understand. The same is true for loan expenses and costs charged by the buyer's bank or mortgage broker. If the HUD were prepared prior to closing, the buyer and the buyer’s attorney would not be burdened with getting explanations about charges from folks who sometimes are curiously unavailable after the closing begins.
Four: Prepare All Checks in Advance
Most closing costs are communicated to the parties prior to closing. Both the seller’s attorney and the buyer should prepare all closing checks in advance and not waste the closing table’s time cutting checks.
Five: Avoid the Photocopy Black Hole
To those of us who attend closings, there is nothing more frustrating than the inexplicable time it takes to copy all the closing documents. A few managing agents have the photocopy machine in the closing room, but in most cases, the closer waits until everything is signed and then leaves the room for a half hour or longer, while everyone chitchats until the process is completed. In all fairness, there are many documents to be copied, but waiting until the end of the closing to copy all of the documents, simply makes no sense. Further, any document that either the buyer’s attorney or the seller’s attorney can copy in advance should be copied in advance and taken off the managing agent’s woe pile. Many closing agents do “get it” and copy documents as the closing takes place, but all too often, the parties at the closing enter the photocopy black hole and another unnecessary chunk of time is lost in the ether.
Residential Reality: Time is Everything, So Let’s Not Waste Any
There are cases where a closing will can take more time: purchases from estates; problems with the walk through; simultaneous closings, where the buyer is selling one property and buying another; and closings where third parties, such as taxing authorities, are present to have a debt satisfied. Sometimes one of the essential parties, such as the closer for the bank, is unavoidably detained. It happens. In many cases, however, implementation of the steps outlined above, will accelerate the co-op closing and get the parties on their way. Did I say congratulations?