Need Advice!
Hi there seasoned investors! I am in the process of purchasing two 4 units in Baton Rouge. I wanted to do it 100% financed. The sellar agreed to a certain price ,79,000. The properties should appraisexc for 85,000 ea., so I wrote the contract for 85,000 with the seller giving me 6,000 back for each unit.
The banks are asking me why am I doing this? So what did I do wrong and is there any way to save this deal. My mortgage broker is good and works her tail off but she is new at this and very willing to learn the process. She is a co-buyer with me so there are those added benefits.
What should I have done? And what can I do now?
Needs answers ASAP!
Start over, your mortgage broker should be able to walk you through what you need to do. Its all dependant on what the lender will lend on the property and how they will want the deal structured. Maybe a secondary loan that is forgiven after closing, or seller paying a down payment and tacking it on the loan, etc etc.
You need to ask the lender or underwriter what they will loan on that type of property and then make it meet there specifications for the loan. Not the other way around. Some of it may need to be transparant, some of it may have to happen after the closing date.
While your mortgage broker may have good intentions, she should have given you the paramaters of the lending institution for you to meet there qualifications. At this point you may want to have her seek out another lender since your deal is so transparant. Or have them tell you what they will lend and rework it from there.
Hope that helps,
Kyle
Reklats
When doing the type of deal you are suggesting you either have 6% seller consession, which in your case would be $5100.00. Or you can use a seller credit of $6k. Or use the $6k as a down payment and have the seller give the money back to you out of closing for repairs. Also if the broker is a co-buyer that might make the deal a conflict of interest. Some banks won't allow that,some will. Ask your broker to have the lender explain the denial letter or stip sheet to them. Tell them to ask until they completely understand what went wrong or what needs to be done. If you were approved by one lender you can get approved again. This time have the broker go ovet the deal with the account Rep, they usually will help.
Good luck
Lori
[addsig]
thanks everyone for your advice. Yes, i needed a good broker to help me through this situation. I have brought 4 other SFH and rented all of them out but this is my first venture into the creative financing mode. There really isnt a lot of books out there to help me along so i read as much as I can here. Anyway, my broker really dropped the ball. she was clueless on creative financing, more so than me and I was holding her hand thru this venture. I was asking her over and over why i never got a truth-in-lending doc back. To to me this meant she never *really* secured a lender dispite her saying she did. I was working with one of these bridge loan company to cover the down and closing costs. Also, the broker was sooooo clueless she presumed it was already appraised simply because I mentioned to her that it will appraise for certain amount (based on what the sellar told as she recently appraised it)! isnt that rudimentary lending 101 any bank will want to use their own appraisers to verify the properties' value? I was amazed at how cluesless she was. She was so good with the refi of my house. <sigh> Since it was past the closing date, the sellar, who happened to be a real estate broker, let me off the hook to at least get my earnest money back. She had back-up buyers.
So there are serval approaches I think I will take next go around:
1) ditch my mortgage broker. It's not my job to train her especially she is getting a commission for this.
2) if proeprty is suffiencently below market , get a line of credit and use that to buy the property then do a refi.
I think the way the loan was written was ok. I probably could have written it better to make the banks not raise eyebrows. someone told me 6000 for repairs for a 85,000 property is too high but I get so many different takes on this thing. I think it depends on how the loan is presented and how conservative the lender is. I have to say though i am pretty upset with my mortgage broker playing along with this deal. If i known she was so out of it, I would have switched brokers and still not lost this property. oh well.
So if there is another property like that and I need to do 100 financing, and the property is below market what is the best way to structure the contract?[ Edited by reklats on Date 03/02/2004 ]
Your broker was doing a "less than at arms length transaction" which is frowned upon in the banking industry. She shouldn't have written a loan where she would have a vested interest. You should have received a truth in lending disclosure as well as a good faith estimate within 3 days of application, and her company would have ordered an appraisal. FYI: receiving a Truth in Lending disclosure does not mean that financing has been secured. One way to structure your deal, would be for Seller paid consessions, closing costs and pre-paid items (3-6 %) depending upon your lender. Another way would be for a "decorating allowance" to be written into the purchase agreement, that is, paint and carpet, perhaps appliances. I would steer clear of funds for repair, as this is a flag to the underwriter to escrow funds, usually1 1/2 times the actual cost,and or course, an appraiser would be needed to do a final inspection to release the funds.
[addsig]
First off Reklats.
Why are you paying so much for the property? I am sure you could find a better deal buying direct from an owner.
Secondly, the banks want to see that you have some money in the deal as well along with some reserves. That is your problem. One way of getting a no-money down deal is to open up another escrow and have the seller carry a silent second that records after the sale. You will have to put your money up for a few days until the second is recorded and the seller gives you back your money.
Best Riches,
Jeffrey Adam
[addsig]
Quote:
On 2004-03-02 02:33, JeffreyAdam wrote:
First off Reklats.
Why are you paying so much for the property? I am sure you could find a better deal buying direct from an owner.
Secondly, the banks want to see that you have some money in the deal as well along with some reserves. That is your problem. One way of getting a no-money down deal is to open up another escrow and have the seller carry a silent second that records after the sale. You will have to put your money up for a few days until the second is recorded and the seller gives you back your money.
Best Riches,
Jeffrey Adam
Well I would LOVE to pay way less for the property but I live in CA, but email me if you got some
But it was going to cash flow and the vacancy in that area was low. I guess there are so many factors. If i could and wanted to invest in my backyard (I cant and dont) I could work it especially what I know in my field (urban plannning). Heck I practicaly train the guys who do multi millions projects-- if only I could get 1% of those deals!
So when I do find good deals that are bird dogged to me I take it. I own homes in other states and it works well for me. California is that unique real estate situation that IMO is not worth the effort unless you work for a big venture capitalist to work large million dollar projects and you get a piece of the action.