‘United We Stand’ - Smoothing the path to successful bridging completions
Of late, it seems that everyone I speak with - brokers and lenders alike - have a complaint about the time bridging cases are taking to complete.
I’m sure this isn’t unique to me, so I’d like to take this opportunity to explore how we might make the situation better.
We, ourselves, have recently experienced record levels of pipeline applications ‘sticking’. These are cases where the client has already committed their own money but where, for whatever reason, the process is proving painfully slow. It’s no coincidence that conversion rates are trending downwards as a result.
Why? Well, the climate of economic uncertainty definitely seems to have paralysed decision-making for many, whilst the ongoing political backdrop has certainly resulted in property values falling in some parts of the UK.
However, this doesn’t seem to be the only what-might-seem-obvious conclusion. We have also experienced many instances where clients have made the decision to move forward at pace with their real estate business strategies in order to secure what seems to be a ‘bargain transaction’.
In doing so, and in their haste to cut corners, these clients also seem to be suffering delays and frustrations - which are so often avoidable.
My experience of the fund-raising process is that delays can often be smoothed out through solid homework, robust preparation and a bit of sensible collaboration between the broker, lender and the professional parties involved.
Here are some pointers which have helped pre-empt problems at Tuscan Capital but which I’m sure apply elsewhere in the fund-raising process:
- Obtain as much information as possible on day one. This should include the underlying rationale and purpose of the loan as makes sense to the lender. The more complete the initial application, the better. Don’t assume what the lender needs or doesn’t need to know. Withholding information just causes delay, so better to get in front of it.
- Do as much research as possible on the client’s property valuation assumptions. Most people are too optimistic about the value of their own homes. With comparable data so readily available, it is easy to do your own checks. This could prevent your client from incurring expensive up-front valuation costs.
- A valuation lead-time from inspection-to-report can often take up to several weeks. Use this valuable time to collate all the outstanding requisitions and KYC documentation needed by the lender to progress their credit sanctions and legal requirements.
- If your client wants to use their own solicitor, make sure they are property lawyers experienced in real estate lending. Using a family firm or ‘friends-of-friends’ may seem a cheap option but often ends up frustrating the process through lack of knowledge and understanding of the required protocols (this, in my experience, is the single biggest cause of delays in the bridging process). Wherever possible, point your clients in the direction of an experienced specialist firm and urge them to engage in early and transparent communication with the lender’s lawyers.
Aside from the above, open communications and the proactive management of the professional firms engaged can reduce significantly the time expended to achieve drawdown of bridging funds.
United, we can indeed make the process smoother.
This article first appeared in the October 2019 edition of ‘Advantage’ - the FIBA monthly member e-newsletter.
For more information, visit: fiba.org.uk