Co-op Building not approved by lender
So, after a month or so of painful interviews, giving my life on paper to people I do not know and putting a bunch of money together, FINALY I got approved to get a loan and buy a co-op apartment in BKLYN. To my surprise , my mortgage broker called me a said that Citibank…
So, after a month or so of painful interviews, giving my life on paper to people I do not know and putting a bunch of money together, FINALY I got approved to get a loan and buy a co-op apartment in BKLYN. To my surprise , my mortgage broker called me a said that Citibank had no problem with me, but that they would not approve the building for the loan ! the reason is that some other tenants owe mantenance to the co-op (all together $20,000). Has anyone had this problem before? Is there any way I can go around this?
thanks
The Mortgage broker I am using just e-mail me saying Citi has declined the building again. He is preferred Empire Mortgage and he is the first broker I have dealt with. Is it OK to shop araund? any one knows lenders that would deal with this size co-ops? any idea as to what to do next?
thanks
correction rates have indeed changed in the last 3 months
I live in a 60-ish unit co-op and have served on the board. 20K in back maintenance is quite easy to achieve, especially over the years, how does this affect their cashflow – they may be paying their bills but low on reserves, (if they have any) … also note that tax credits and the like might change that actual number.
Banks are scrambling and panicking, people are getting mortgages for developments with no CofO, but you are looking at a building where (I hope) the majority of people pay their maint and has a track record? Ask your lawyer to pressure the bank (actually the bank can do what it wants but…)
Its my theory that banks are going to be doing these sorts of ‘considerations’ to a) reduce exposure and b) raise the rate they promised you
I am not saying they are doing this, but if I was a bank, in this market, I would like at renegotiating whatever I promised you 3 months ago (though rates have been in the same ballpark I think)
for example a sponsor with 10 units in a 60 unit building can, for some reason, not pay maint. for 2 months – there is your 20K. Same sponsor can also cut a check for 20K; a middle class person who is juggling finances may miss a couple of months due to job loss, etc, and enter into a payment plan that pays $1800 over a year!
full disclosure: I am waiting for my clear to close on a unit I sold and the buyers bank is DRAGGING… everyone assures me its going to close, but I know my co-op is not exactly ‘highly attractive’ as an investment right now.
on the other hand, it does take a lot of effort to set a co-op straight – from finances to trash collection, you can’t just ‘sleep’ there
good luck!
Wow, $20,000 in back maintenance is a big chunk of money. To the bank, it makes it look like the owners aren’t a responsible bunch and if that much money hasn’t been collected now, what could happen in the future if there’s a major issue like a boiler needing to be replaced? Can all of the owners be counted on to pay for it or is the building going to default on it’s underlying mortgage? That’s what the bank is looking at. In my coop, we came down hard on people after missing just two or three maintenance payments. You have to. If the payments aren’t turned in, bills aren’t going to be paid on time and that makes everyone liable. Sounds like this building, even with 60 units, is a problem. On paper, it makes it look like it isn’t financially sound.
What percent down payment are you putting? Would that effect the banks decision?
Thanks for your comments.
The building has about 60 units and as I understand it the $20,000 are a figure that was added through many years. I am out of the country right now and can’t look at the financial, but will do as soon as i get back.
This must be a very big building or is it actually that their was an assessment that some have not yet paid? What was it for and what other major capital improvements are going to be needed?
A $20,000 open tab sounds very suspicious — i.e. more than just back-mainienance. How many units approximately is the co-op?
It happens. And if you think of a co-op purchase as being less a real estate investment and more purchasing stocks in a corporation, would you really want to buy stocks in a corporation where the other owners aren’t paying their bills? It also raises questions about the management of the co-op. In the small co-op I was in one owner (with mental health problems) would default on her payments, we would sue her, her bank would pay up the maintenance. Seems to me you at least want to see what is going on there. And your lawyer? She never noticed this in her review of the building’s financials?