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The most efficient and cost effective way to purchase
and develop property is to conduct due diligence with
an eye toward the likely needs of your financing source.
You can take certain steps during your due diligence
process that could save you money and streamline a closing
with your financing source.
- Negotiate with the environmental firm performing
the Phase I Environmental Report the ability to either
address the report to both you and the financing source,
or to obtain a "reliance letter" on behalf of the financing
source, which, in essence, will put the financing source
in privity to the Environmental Report. If you and/or
your financing source choose the latter, obtain a copy
of the form used by the environmental firm at the outset
to view any caveats or restrictions on the reliance
letter. Further, determine whether there is a time
limit from when the original report was issued to when
the environmental firm will issue the reliance letter
(many environmental firms limit the issuance of the
reliance letter to six months or less from the date
of issuance of the original report).
- Determine if the financing
source will require any additional
endorsements on the title policy
(zoning endorsements, access
endorsements, contiguity endorsements,
and so forth). Request these
endorsements when you request
the issuance of the title commitment,
as it will give you time to
produce any documents requested
by the title company and avoid
any last minute delays. (WARNING:
some title companies will charge
a fee for endorsements. When
you request the endorsement,
find out if there is a fee,
and if there is a multiple
fee for issuance of the endorsement
to both you and the financing
source.)
- When
your financing
source obtains
a lender's
policy for
title insurance
(that you
are, no doubt,
paying for),
we recommend
that you
also obtain
an owner's
policy. The
lender's
policy only
covers the
bank and
not you.
Discuss with
the title
company whether
you may be
able to take
advantage
of a reissuance
rate or other
discount
depending
on the timing
of your closing
on the land
acquisition
and the closing
with the
financing
source.
- In
the
case
of
a
construction
loan,
as
a
part
of
the
negotiations
with
your
architectural
and
engineering
firm,
negotiate
a
fee
for
inspections
that
may
be
required
by
the
financing
source.
You
may
be
able
to
obtain
a
better
rate
for
the
inspection
fees
if
it
is
negotiated
as
a
part
of
the
larger
contract.
Further,
determine
if
the
financing
source
will
require
an
architect
and/or
engineer
to
administer
the
draws
of
the
contractor,
and
negotiate
this
fee
up
front.
- Also
in
the
case
of
construction
lending,
make
sure
that
when
you
negotiate
the
construction
contract
the
draws
required
by
the
contractor
match
that
which
your
lender
and
title
company
are
willing
to
commit
to.
If
you
are
not
able
to
determine
this
on
the
front
end,
make
sure
there
is
a
caveat
in
your
construction
contract
which
allows
you
to
alter
the
construction
draw
process
(either
the
number
of
draws
or
process
of
draws),
to
be
in
conformance
with
the
requirements
of
the
financing
source
and
the
title
company.
- Determine
whether
your
financing
source
will
require
an
as-built
survey.
If
so,
on
new
construction,
negotiate
with
the
surveyor
for
an
aggregate
price
on
the
boundary
and
as-built
survey.
Further,
you
will
want
to
make
sure
that
the
contractor
uses
that
surveyor
to
stake
the
building.
- If
you
have
negotiated
any
special
circumstances
with
the
seller
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