What Happens After the Term Sheet? A Guide to Closing

Signing a term sheet feels like the finish line. It isn't. It's the starting gun.

Between the signed term sheet and the wire hitting escrow sits 30-90 days of third-party reports, legal drafting, title work, lender conditions, and a hundred small tasks that each have the power to delay, reprice, or kill your deal. Most financing failures don't happen at the term sheet stage. They happen here, in the closing process, where preparation and momentum matter more than negotiation.

This week we're walking through what actually happens after the term sheet: the sequence, the timeline, where deals stall, what it all costs, and how experienced borrowers keep the process moving.

First, Understand What You Signed

A term sheet is not a commitment. With rare exceptions, it's a non-binding expression of interest that outlines the terms the lender expects to close on, subject to underwriting, due diligence, committee approval, and documentation.

What usually IS binding in a term sheet:

The deposit: You'll typically post an expense deposit ($15K-$100K+ depending on deal size) that funds third-party reports and lender legal costs. Read the refund provisions carefully; most deposits are non-refundable once reports are ordered.
Exclusivity: Many term sheets lock you into working only with this lender for 30-60 days. Signing three exclusive term sheets simultaneously is a breach of all three.
Confidentiality.

What is NOT binding: the rate, the proceeds, the structure, and the lender's obligation to close. All of that can change based on what due diligence reveals. Understanding this asymmetry is the beginning of managing the process well.

The Closing Timeline

A typical conventional closing runs 45-90 days. Bridge lenders compress this to 2-4 weeks. Here's the sequence:

Week 1: Kickoff

Term sheet signed, deposit posted
Lender issues a closing checklist (often 50-100+ items)
Third-party reports ordered: appraisal, Phase I environmental, property condition assessment, zoning report
Lender's counsel engaged; borrower's counsel engaged
Title and survey ordered

Your job this week: Return the checklist items you control immediately. Organizational documents, financial statements, insurance information, rent roll updates. Speed here sets the tone.

Weeks 2-4: Due Diligence

Appraisal inspection and drafting (typically 2-3 weeks, the long pole)
Phase I environmental fieldwork and report
Property condition assessment
Lender underwriting refined with verified information
Title commitment issued and reviewed
Survey completed or updated
Tenant estoppels and SNDAs sent out (for commercial tenants)

Your job: Chase the estoppels. Tenants have no urgency and every closing with commercial tenants gets held up here. Start early, follow up weekly, and know which tenants your loan documents actually require.

Weeks 4-6: Approval and Documentation

Final underwriting package to credit committee
Committee approval (or approval with conditions)
Loan documents drafted by lender's counsel
Negotiation of loan documents between counsel
Insurance review against lender requirements

Your job: Turn document comments fast, and keep your counsel focused on the points that matter (recourse carve-outs, cure periods, cash management triggers, transfer provisions) rather than redlining boilerplate.

Weeks 6-8+: Clearing Conditions and Closing

Title exceptions cleared
Insurance certificates finalized to lender specifications
Escrows and reserves calculated
Closing statement negotiated
Rate lock (if not already locked)
Signatures, funding, recording

Your job: Watch the closing statement line by line. Fees have a way of appearing between the term sheet and the settlement statement.

The Third-Party Reports: What They Are and What Can Go Wrong

Appraisal

An independent valuation commissioned by the lender (you pay, they order). The single most consequential report, because loan proceeds are sized against it.

What can go wrong: The appraisal comes in below your purchase price or expected value. Your 70% LTV loan on a $10M valuation just became a 70% loan on $9.3M, and you need $490K more equity. Options when this happens: challenge the appraisal with better comps (occasionally works), renegotiate the purchase price (sometimes works), bring more equity, or add mezzanine/preferred to fill the gap.

Phase I Environmental

A records review and site visit checking for contamination risk.

What can go wrong: The report identifies a "Recognized Environmental Condition," an old dry cleaner, a buried tank, an industrial neighbor, and recommends a Phase II with soil sampling. That adds 3-6 weeks and $5K-$25K+, and a bad result can kill the deal or require an environmental insurance policy.

Property Condition Assessment

An engineering review of the building's systems and structure.

What can go wrong: The report identifies immediate repairs and underestimated capital needs. Lenders respond by requiring repair escrows (often 125% of estimated cost), increasing replacement reserves, or holding back proceeds. A roof you thought had five years of life becomes a $400K escrow at closing.

Title and Survey

Confirmation of ownership, liens, easements, and boundaries.

What can go wrong: Old liens that were never released, easements that interfere with the property's use, encroachments, or a gap between the legal description and the survey. Most title issues are curable but each one takes time, and some (a neighbor's building encroaching on your parcel) become negotiation projects of their own.

Where Deals Stall (and How to Prevent It)

After watching hundreds of closings, the stall points are remarkably consistent:

1. Tenant estoppels. The number one delay in commercial closings. Prevent it: send estoppels in week one, track them weekly, and negotiate your loan documents to require estoppels only from major tenants with a "commercially reasonable efforts" standard for the rest.

2. The appraisal queue. Appraisers are backlogged in busy markets. Prevent it: ask the lender to order the appraisal the day the term sheet is signed, not after the checklist is complete.

3. Insurance compliance. Lender insurance requirements have tightened substantially, and premiums have risen. The certificate your broker sends rarely matches the lender's specs on the first try. Prevent it: get the lender's insurance requirements to your broker in week one, not week six.

4. Entity documents. Multi-layer ownership structures mean multiple operating agreements, consents, and resolutions. Prevent it: have your attorney assemble the full organizational chart and document set before you sign the term sheet.

5. Slow borrower response. The most preventable delay of all. Lenders process dozens of closings at once; deals that respond in hours stay at the top of the pile, deals that respond in days sink.

The Re-Trade: When Terms Change Mid-Process

Sometimes the deal that closes isn't the deal on the term sheet. Proceeds get cut after a low appraisal. The rate moves if it wasn't locked. A reserve appears after the property condition report. Spread widens after committee.

Some of this is legitimate response to new information. Some of it is a lender using sunk costs and your deadline as leverage. How to protect yourself:

Lock the rate early if the lender offers it, and understand exactly when your quoted rate becomes fixed
Ask what's committee-approved before signing. A term sheet that's already been through credit committee is far more reliable than an originator's indication
Keep a backup warm. Your second-choice lender from the competitive process is your leverage if the first one re-trades. A brief, professional "circumstances may open this back up" call costs nothing
Know the lender's reputation. Re-trading is habitual. Ask brokers and other sponsors how this lender's closings compare to their term sheets

This is one of the underrated benefits of running a competitive process through a platform like LenderAve: you know exactly who else quoted the deal, and the lender knows you know.

What Closing Actually Costs

Beyond the origination fee, budget for:

Third-party reports: $10K-$30K+ (appraisal, environmental, PCA, zoning)
Lender's legal: $15K-$75K+ depending on deal complexity (you pay their counsel)
Your legal: $15K-$50K+
Title insurance: Varies by state and loan size; often the largest single line item
Survey: $3K-$15K
Rate lock deposits: If applicable
Escrows funded at closing: Taxes, insurance, repair reserves, TI/LC reserves

On a $10M loan, total closing costs excluding origination commonly run $75K-$200K. Build this into your sources and uses from day one, not at the settlement statement.

The Closing Checklist Mindset

The borrowers who close smoothly treat the process like a project they own, not a process that happens to them:

Respond same-day to every lender and counsel request
Track the checklist yourself in a shared document; know which items are open and whose court they're in
Front-load what you control: entity docs, insurance, financials, estoppels
Hold a weekly all-hands call with lender, both counsels, and title once documentation starts
Escalate early. A problem raised in week three is a solvable issue; the same problem discovered in week eight is a closing delay
Protect the schedule around your hard dates: rate lock expirations, purchase contract deadlines, 1031 exchange windows. Build buffer, because something always takes longer than planned

The Bottom Line

The term sheet is the starting gun, not the finish line. What happens next:

45-90 days of reports, underwriting, documentation, and conditions (2-4 weeks for bridge)
The appraisal, environmental, PCA, and title work each carry the power to reprice or delay the deal
Estoppels, insurance, and entity documents are the most common stall points, and all three are preventable with week-one action
The re-trade risk is real: lock the rate, confirm committee approval, and keep a backup lender warm
Budget $75K-$200K+ in closing costs beyond origination on a mid-size deal

Deals don't close because term sheets get signed. They close because someone drives every open item, every week, until the wire hits. Be that someone.

Want a financing process that's organized from submission through closing? Submit your deal on LenderAve and manage lender competition, documents, and communication in one place.

About Debt Fridays

Debt Fridays is LenderAve's weekly blog series delivering practical insights on commercial real estate financing. Published every Friday, we cover everything from lending basics to advanced deal strategies. Subscribe to never miss an issue.

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Tags: Debt Fridays, Commercial Real Estate, CRE Financing, CRE Basics, Loan Closing, After the Term Sheet, Due Diligence, Closing Process, Estoppels