Posted by Jim LaVerdi on December 23, 1999 at 24:14:56:
Tom:
I will give you my thoughts on this, but you should maybe post this question to Bill Bronchick on Legalwiz.com to be sure.
As far as you taking back a second…That’s your decision! No bank should dictate what you do, or who you loan your money to.
I really don’t think that the appraisal situation is your problem. The Lessee agreed to pay your price. It’s now up to him/her to get the cash you need or they forfeit their “Option Consideration” That cash will buy you your time to find perhaps another Lessee and do it all over again! I would hope you did get a good amount of cash for consideration when the lease was signed. This is “Non Refundable” and helps you in times like this if things don’t work out. If they have been good payers I would carry a second. Hey MO MONEY for your pocket!
I tried this question a couple of days ago and got no responses. Can anyone help?
If you were in the middle of a sandwich L/O and when the time came for your T/B to purchase the appraisal came back 10k less than you had priced it to the T/B, what options do you have?
Will the lender let you take back a second for that amount? Or will they not finance it if the T/B is paying more than the proiperty is worth?
Posted by JPiper on December 23, 1999 at 08:29:37:
You?re really looking at two separate issues here.
First, it?s possible for you to carry the difference?.IF (and it?s a big if) the lender permits it. Lenders loan on the lower of appraised value or purchase price. Some lenders/loans may not permit loans in excess of 100%CLTV?which of course the combination of a first and your second may be. The lender would not have a policy against the borrower paying the difference in cash. And of course if the combination of the two payments on the loans does not fall within the lender back-end ratios, then this would not be permitted either. Best idea here is to ask your mortgage broker what the policy is for the type of loan that you may be using. Keep in mind, policies change. Because it?s true today doesn?t mean it will be true tomorrow.
Probably more important is that if the appraisal does not come in, why would you think that the tenant/buyer would exercise his option??? Another BIG assumption in my opinion. And as Bud mentions, there?s a big difference in what the price of the property is.
These days appraisals come in, more often than not. But certainly that doesn?t mean they always will. It?s clear that just because the tenant/buyer agrees to a particular price in the future, it?s not a guarantee that the property will appraise at that price at that time. Almost anything could change?.market conditions, underwriting guidelines, or how hard the appraiser works to establish value.
The 10K you mention makes a lot of difference if it is a 50K house but no so much on a 150K house. Some lenders will allow you to take back a note for more as long as their ratios are met. But I would bet that the appraisal would come in at the right amount since it is not an exact science.