Commercial Real Estate Loan in Texas: Refinance vs Acquisition loans

Commercial Real Estate Loan in Texas: Refinance vs Acquisition loans

Refinancing a commercial real estate loan in Texas

When the borrower refinances its existing loan, the refinance loan may be with the existing lender or a new lender. When the refinance is with the borrower’s existing lender, there may be less work leading up to the closing compared to a refinance of an existing loan with a new lender.

The closing instructions for a commercial real estate loan in Texas made in connection with the refinance of the borrower’s existing loan should include a detailed summary of the anticipated disbursement of the loan proceeds and the closing costs.

Which include:

  • Payoff of the outstanding loan amount to the borrower’s existing lender.
  • Interim interest payments for the stub period.
  • The stub period interest payment covers the interest that accrues under the loan terms from the date of the loan closing through the last day of the month in which the closing occurred
  • The lender’s closing costs, including attorneys’ fees.
  • The policy premium for the loan policy of title insurance. A loan policy issued for the refinance of a loan is eligible for a premium discount if the loan to be refinanced is covered under a title policy issued within seven years of the new policy
  • The surveyor’s fee.
  • Any environmental assessment fees.
  • The borrower’s attorneys’ fees.
  • Payoff of the lender’s attorneys’ fees.
  • Assignment of the existing loan to the new lender requires more participation by the payoff lender’s attorney, resulting in higher fees than if the existing loan is paid off and released.

Acquiring Real Property

When the borrower is obtaining a loan in connection with the acquisition of real property, there are many more steps than with a refinance. The borrower’s counsel must consider all time sensitivities in its real estate purchase and sale agreement, such as a time is of the essence closing date. Any delays in closing the loan may have costly consequences to the borrower as the purchaser under the purchase and sale agreement.

The closing instructions for a commercial real estate loan in Texas made in connection with the acquisition of real property should include the material terms of the purchase and sale transaction and the loan transaction and a summary of the anticipated disbursement of the loan proceeds and the closing costs:

  • The purchase price balance owed to the seller under the purchase and sale agreement.
  • Payoff of the seller’s existing lender and payment of the payoff lender’s attorneys’ fees.
  • Charges against the purchase price of the real property for seller’s closing costs, such as the broker’s commission and pro-rated taxes.
  • Interim interest payments for the borrower’s loan for the period of time from the closing date through the last day of the month in which the closing occurs.
  • The lender’s closing fees, including the lender’s attorneys’ fees.
  • Premiums for the owner’s and the lender’s title insurance policies. Texas title insurance premiums are all inclusive so the cost of the initial title search is not listed as a separate charge.
  • Advance payment of the borrower’s taxes and flood and hazard insurance premiums required by lender.
  • Survey fees.
  • Any environmental assessment fees.
  • The borrower’s attorneys’ fees.
  • Recording fees.

Coordinating the Signature Pages

For transactions of a commercial real estate loan in Texas, original signatures are typically required for the closing to occur. If the documents are to be electronically filed for recording, the recording documents may be copies of the original signed and acknowledged documents. One originally executed promissory note is always required.

A paper document to be recorded must either:

  • Contain an original signature or signatures that are acknowledged, sworn to with a proper jurat, or proved according to law.
  • Be attached as an exhibit to a paper affidavit or other document which has an original signature or signatures that are acknowledged, sworn to with a proper jurat, or proved according to law.

To acknowledge a written instrument for recording, generally the person executing the instrument must appear before an officer authorized to take an acknowledgment and must state that the person executed the instrument for the purposes and consideration expressed in it.a

The closing instructions may specify which documents:

  • Must be received with original signatures on the date of closing.
  • May be submitted a few days ahead of the closing date.
  • May be copies, provided that originals are to be delivered shortly after the closing.

The executed signature pages may be delivered to the holder before the closing date. It is not uncommon for one or more parties to attend a formal closing at which the final steps to consummate the transaction, such as the borrower’s execution of the promissory note, are completed. This practice may reduce the need to distribute separate signature pages for some documents.

 

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