When government staff aren’t at their jobs it delays loans, permits and even contractor availability which can be a nightmare for real estate investors. The best way to prevent problems is to be proactive, and one tactic to beat a potential shutdown is to make sure you get your permits and approvals promptly.

But how can you do this, and which ways can you be proactive? Let’s take a look at how to find ways to work around closed departments and find alternate solutions when offices are closed, and employees aren’t picking up phones.

The IRS Won’t Process Forms

When IRS employees are furloughed, they no longer process Form 4506-T, which allows banks and lenders to access past tax transcripts. This means they won’t be able to verify financials which can delay underwriting and funding of your project. A tax transcript isn’t the same as a tax return, so simply submitting a personal copy of your return might not be enough.

Banks have the leeway to get the transcripts after closing, especially if your income is well documented. Otherwise, you may need to seek out an alternate lender who can process a loan without getting your official tax documentation. A bridge loan is another solution, allowing you to borrow funds for up to 12 months while you get your long-term funding in place.

FHA Loans Grind To A Halt

FHA and Freddie Mac will still back mortgages, but during a furlough they are short staffed. If you’re flipping single family properties, that can cause problems for your buyers as their approvals are delayed. Areas such as Washington DC or Texas with a high percentage of federal workers will be hit especially hard by a sluggish FHA underwriting process, and you may find your days on the market increases as buyers struggle to get mortgages.

If you must have a quick closing, consider limiting contracts to buyers who can self-fund. Another alternative is a short term “rent-to-own” type contract where your buyers rent the property for a short time with a commitment to buy when the furloughs end and loans are being processed on time.

DHS & E-verify System Cause Labor Shortages

Construction contractors who are unable to verify workers using the E-Verify system during a federal shutdown could have a shortage of skilled labor to get your projects done. The best way to prevent this problem from affecting your builds and rehabs is to work with companies that have low turnover and who keep employees around for a long time. Get referrals for good workers from your lender or other investors and talk to the workers on local jobsites to find out how long they’ve been with that company. Develop relationships with your contractors, and in return has the added benefit of making your other projects go more smoothly as they get to know your needs.

If finding skilled tradesmen becomes a problem, look around for firms that subcontract to federal prime contractors. They’ll not only be verified, but since they also can’t work on government projects during a shutdown, they might jump at the chance to do some residential or commercial work on the side to keep their crews busy. The GSA keeps a list of subcontractors, and while that list isn’t going to be updated during a shutdown you can still access it and find companies that were listed in the past.

USDA Loans Stop

Rural development loans through the USDA come to a halt during a shutdown. Not only are loan applications not being processed, scheduled closings aren’t completing on time which can kill a deal if the borrower can’t meet contingency guidelines. If your investment property is in a USDA zone, you can limit contracts to conventional mortgages so you don’t have to worry that your buyer’s loan won’t close.

If you’re the one relying on a USDA loan to close, you need to find alternate funding such as a conventional loan, acquisition loan or bridge loan. If you have earnest money at stake, another solution could be renegotiating your buying contract to allow the seller to remarket the property while giving you the right of first refusal. That way the seller can put it back on the market but you’ll still get a chance to claim it if you can find another lending source.

EPA & Army Corps of Engineering Won’t Issue Permits

If you’re developing a multifamily dwelling, river, or coastal property, you might need the Army Corps of Engineering to issue water permits related to section 404 under the Clean Water Act. Unfortunately, USACE shuts down immediately if the budget isn’t funded.

Prevent delays by getting permits, including for any dredging or construction that affects the waterfront, as early in the process as possible and if you sense a shutdown looming, communicate with your builders and your local permitting office to brainstorm workarounds right away to prevent long term delays. You need to call them before furloughs start to make sure there’s someone in the office to answer the phone. In some cases, permitting authority is given to the state which keeps the process local and functioning during a federal shutdown. If you’re not sure what permits are needed or which government authority to contact, start with our local municipal service.

Furloughs don’t have to stand in the way of getting your rehabs and investment properties flipped and back on the market. A little planning can prevent delays and problems and keep your business going during a shutdown.