Posted by ski on July 09, 2005 at 20:26:19:
Had this problem with a mortgage I was tryiong to sell. They wanted documentation and receipts for the materials used. After about 4 months of back and forth I simply told them either do it my way or hit the road. They finally complied and I didn’t have to show anything. I guess they really wanted to buy the mortgage after all. Bottom line… Stick to your guns.
All of a sudden, I can?t sell my Rehabs. - Posted by PH
Posted by PH on July 08, 2005 at 09:54:50:
I have had 5 contracts fall through. Never had this problem before.
Investor used his own lender so I was in the dark about the reason
Retail buyer, underwriter kept coming back with conditions.
*Questioned the Value and requested additional Comps/photos, They wanted comps to be on the same street. I provided Dramatic before and after photos that showed the walls with no sheetrock and overflowing toilet, gutted bathroom and kitchen, added C-H/A etc. Same street comps were provided that more than supported the value.
Every one was answered but they finally said no citing an issue (old issue they knew about from the beginnning) with an account on the buyers credit report. it did not make a lot of sense.
(All cash Retail buyer. Was waiting on settlement that never came. )
Retail buyer with 680 credit score. I had to get an updated appraisal. This was for a completely different lender than in #2 above.
*This time the underwriter came back requesting receipts for the work done. They wanted the appraiser to take the receipts and incorporate them into the appraisal. It was difficult to get him to agree to this, but he said all of a sudden he has had a few requests for it lately.
Loan denied due to the transfer price+receipts not adding up to enough to make them happy.
Virtually the same scenario as above but with a different lender and buyer.
(keep in mind that each time I lose about 30 days, I have had this house for 6 months, I have never had to hold a house this long)
Current house shows purchase price of 22k, receipts+pp add up to about 36k and appraisal is 51k.
First house I did in that area TWO years ago showed purchase price of 8k, receipts+pp added to about 29k and appraisal was 61k, no problems on that one.
Underwriting guidelines are changing in my opinion and FAST (would love to hear input from any loan officers or rehabbers on this issue).
This is my 12th rehab. The first one I did was in this same area but a couple of miles away. The difference in purchase price and appraisal on that one was much much larger. I had no problems with my buyers underwriter questioning the value, requesting receipts/photos.
I think I am just now realizing that, it?s not that I am getting unlucky. It?s that the rules have changed. I spoke to another rehabber who is experiencing the same problem and it?s just started to affect him in the LAST COUPLE OF MONTHS where they underwriters are requesting receipts and denying more and more loans.
It?s not that there is a problem showing proof of the work being done, it?s that who knows what value they want them to add up to. It almost seems that they may be looking for a dollar for dollar value. (transfer price+receipts=appraisal or deny the loan)
So I am sitting on two houses that I can not imagine a scenario where I can get the houses sold other than selling for all cash at a large discount to a landlord type who can come up with cash. I spend a lot of money on marketing to get the few retail buyers with a good enough credit score to qualify. Now, I can?t find a way to sell to them regardless of how great their credit/income is.
Even if I sell to a landlord at a large discount, it?s not so easy to find one with all cash. I use short term private money, so I can?t do a rent to own etc. I have to find a way to sell soon.
I would be interested to hear from other rehabbers who are currently selling or have sold houses in the last couple of months (where the buyer obtained a loan). Is this an issue for you? Any ideas? Maybe it’s just my city?
This is a huge problem, If you can?t sell rehabs then your out of business. I am going to sell these houses at whatever price I can get, giving up most or all profit just so I don?t get killed with holding costs. Then I am not buying any more houses until I can figure out how to adapt.
jennifer lopez - Posted by jennifer lopez
Posted by jennifer lopez on October 18, 2005 at 23:08:57:
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jennifer lopez - Posted by jennifer lopez
Posted by jennifer lopez on October 18, 2005 at 23:06:49:
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Deja vue - Posted by SteveA (FL)
Posted by SteveA (FL) on July 10, 2005 at 10:37:41:
I can’t believe this, but after I read this post Friday, my lender called me and told me his underwriters are questioning my latest loan that he approved. They had inaccurate information and he clarified it for them. I think they’re pushing to get this loan classified as an investment property to charge me a higher rate and deposit.
I may be looking for some fast hard money in North Florida soon if anyone can point me in that direction!
Loan Prospector underwriting system - Posted by PH
Posted by PH on July 09, 2005 at 20:44:00:
Well, now I am responding to my own post because I found something interesting searching google.
?Freddie Mac, the nation’s second largest mortgage buyer, last October implemented automated property valuation warnings for lenders using its Loan Prospector underwriting system to help them spot and hold funding on potentially fraudulent loans.
The company’s automated valuation model quickly estimates the subject property value for lenders and compares it with the stated value. If the value is excessively high ? a common sign of fraud-in-progress ? the system will return a feedback message to the underwriter.?
Re: All of a sudden, I can?t sell my Rehabs. - Posted by JC
Posted by JC on July 08, 2005 at 23:10:16:
Can i ask what state are you in?City?Thanks
Re: All of a sudden, I can?t sell my Rehabs. - Posted by Don Dion
Posted by Don Dion on July 08, 2005 at 22:50:03:
I have been in the mortgage broker/banking ind since the early 80’s. Currently only doing commercial but I did post here last year that both FHA and Fannie Mae had come out with directive rule changes that would impact the quick fliping of homes. I would guess your seeing the effect of these changes and it will get tighter in the next few months. From what I was reading about the changes is if you own the property for over 12 months then they will use the appraised value. The latest change in the past 6 months or so is the demand for chains of title and closing protection letters on most residential puchase deals being requested from underwritters to the title.
Re: All of a sudden, I can?t sell my Rehabs. - Posted by Natalie-VA
Posted by Natalie-VA on July 08, 2005 at 16:34:36:
PH,
Dave gave you a great answer. You MUST get control of these transactions.
I am a rehabber and I no longer have these issues. I haven’t had to give receipts in a couple of years.
It all comes down to the lender. Do not go with brokered loans. Require the buyers to use a LOCAL lender that you have pre-screened. When I started doing this, my transactions became hassle free.
–Natalie
Re: All of a sudden, I can?t sell my Rehabs. - Posted by John
Posted by John on July 08, 2005 at 15:44:14:
where are you located?
Re: All of a sudden, I can?t sell my Rehabs. - Posted by Rob
Posted by Rob on July 08, 2005 at 12:22:11:
I agree with Dave and Stu. Certainly the issue is the type of homes you are buying. Where I am flipping used to be a major issue with the lower priced homes. Therefore lenders were scared of these properties. I have a couple lenders that know I rehab homes and are willing to work with any buyers I have.
Get back in control - Posted by DaveD (WI)
Posted by DaveD (WI) on July 08, 2005 at 11:48:06:
PH,
You are probably good at finding deals.
You are probably good at negotiating deals.
You are probably good at fixing houses.
You are probably good at setting your sell price.
You are probably good at finding buyers (five of them!).
You are probably good at negotiating deals with buyers.
Then you think your job is over. It’s not. Not even close.
You see, now you have to manage the lender, appraiser, inspectors, title company and maybe buyers broker or lawyer. Yep, sellers, contractors, buyers are relatively easy to handle. Getting paid is a little tougher. Do you see your mistake now?
The minute you signed off on an accepted offer and sent your buyer off to get financed, you lost control. Getting paid means staying in control. Nobody cares about you getting paid except you. You’ve got the front end of things nailed, but the game is only at half time. The second half is just starting. Better lace up your combat boots again. You have to keep moving the ball.
Direct your buyers to YOUR lenders. Lenders who understand how you do business, know how to package your buyer, and work with intelligent underwriters who understand that comparable sales are what set the market, not what YOU paid for your fixer. Sure, I frequently have to submit a laundry list of all the recent improvements. Receipts? Not on your life! Anytime you have to justify your “exorbinate” price raise up from what you paid means you are dealing with the wrong loan product.
Certain loan products are not a good fit with rehabs… seasoning, receipts, etc. It is the job of the competent few lenders whom you have a relationship with to sidestep those mine fields. Homeowners who sell a house or two in their lifetime don’t have to bother with all this extra work. It is critical for anyone who sells more than a few a year to know this part of the business inside and out. That’s you.
There are legions of lenders who, to put it charitably, aren’t any good. You can’t afford to chance it on who they are. Even if they are the buyers best friend. Not if you want to get paid on time.
Pay your buyers closing costs (or a piece of them). Now you are adding something of value and are not guilty of steering them. Get back in control.
-Dave
One possible answer - Posted by ken in sc
Posted by ken in sc on July 08, 2005 at 10:57:53:
You might want to consider buying more expensive houses. The problems you speak off are not for all lenders. But they are prevelant in lenders in cheaper houses and subprime borrowers. You spoke of one of your buyers having a 680 score, this was likely a B paper loan. These lenders are very hard to work with and appear to be scared to death of “flipping”.
However, if you were to rehab a $200,000 house you will find that these buyers have very good credit - an A paper borrower. I have very little to no problems with underwriting on these loans. None have ever asked for receipts as is common for the subprime loans. So, you might want to consider doing 1 rehab at 200K instead of 4 at 50K - as long as you can make the same basic profit.
Ken
Re: All of a sudden, I can?t sell my Rehabs. - Posted by Stu
Posted by Stu on July 08, 2005 at 10:52:27:
Since you have 2 homes remaining (instead of many), you could do a refi at 80%ish and pay off your higher interest private money and your costs and pocket some profit and then use the reamining 20% equity spread to sell on a wrap at a higher interest rate. If you created a wrap with a balloon then your end buyers and their lenders would likely be more lenient on a refi in 6 or 12 or 24 months than on a new purchase money mortgage. Just a thought from someone who doesnt work rehabs but does work paper.
stu
Re: All of a sudden, I can?t sell my Rehabs. - Posted by Jeff
Posted by Jeff on July 08, 2005 at 10:26:32:
We discussed this just this morning in our REIA subgroup. The forum was led by a mortgage broker who reiterated, almost word for word, what you are saying. Her main point (as most of us know) is that lending is cyclical. There are times where it seems lenders play loose with the rules and are dying to give us money. Due to foreclosures, bubble talk, etc., we are coming into a time, now, where they are tightening the belt. Many lenders won’t even fund the deal now if they know the guy you bought it from made more than 10%. And, as you said, they want to see real improvement to the property, backed up by receipts. They are putting the screws to the appraisers to validate big increases in value.
Re: All of a sudden, I can?t sell my Rehabs. - Posted by SteveA (FL)
Posted by SteveA (FL) on July 08, 2005 at 10:17:45:
I wouldn’t be surprised if lenders are exceeding their ratios with the phenomenal rash of home buying the past several years. And now they have to slow down and be picky.
Do you know any mortgage originators personally you could ask?
Just a thought.
Re: All of a sudden, I can?t sell my Rehabs. - Posted by Joe
Posted by Joe on July 08, 2005 at 10:06:25:
T.T.G.B.T.Y.D.J.
Time to go back to your day job?
Re: Deja vue - Posted by thutch (orlando)
Posted by thutch (orlando) on July 12, 2005 at 20:57:47:
Call Adam Sleap at San Jose Investments.
His number is 407-766-1849.
He is fast, fast and good.
paris hilton - Posted by paris hilton
Posted by paris hilton on October 18, 2005 at 21:05:51:
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Re: Loan Prospector underwriting system - Posted by Marie
Posted by Marie on July 10, 2005 at 13:45:40:
This is a very disturbing and frightening trend!
I am very much against “Predatory Lending”, and agree that it should be stopped, but not allowing a legitimate Rehabber to sell his or her property with the most widely used loans, amounts to nothing less than discrimination against this type of doing business!
Legitimate, honest Rehabbers provide an essential and important service. They take risks and fix up otherwise unmarketable properties and improve or preserve the Real Estate values of the neighborhoods in which they have done this!
They then offer clean, habitable properties back to the average homebuyer, who get the property in useable condition.
Without Rehabbers, some properties would remain unsold for very long periods of time. This would increase the number of abandoned houses, and abandoned houses are magnets for trouble and crime!
Average homebuyers do not want to tackle the really tough rehab jobs, nor do they have the knowledge or skill to know how to properly do the work.
A Seller of a neglected property in foreclosure would then have very little chance at all of selling the property before it was foreclosed upon, and would not have the option of saving what was left of his credit, or getting anything at all from the sale.
Without Rehabbers, Banks would most surely end up taking these properties back and have to fix them up before disposing of them. This would lengthen the time the non-performing loan was on the books.
This is a very bad precedent, and yet, the Check Cashing centers go on charging what amounts to over a 300% annual cost for a very, very short loan are allowed to continue their predatory lending with immunity! It is no surprise that these centers are mostly owned by Banks! The only difference between these centers and the Mob is that they don’t break your legs if you don’t pay!
What a frightening time we live in!