New development and Fannie Mae Approval
We are negotiating a contract to purchase a unit in a new development in park slope. We included in our rider that we will not close until the building is fannie mae approved. The sponsors attorney struck out that language from the contract. Our attorney is going to go back to them as this is…
We are negotiating a contract to purchase a unit in a new development in park slope. We included in our rider that we will not close until the building is fannie mae approved. The sponsors attorney struck out that language from the contract. Our attorney is going to go back to them as this is a dealbreaker for us. Anyone else been in a similar situation? Did you close? Walk away?
Any help is appreciated.
Has the building even applied for Fannie Mae approval? Not all do – and again, even if they have, it will be a long time before you can close. In terms of your other question, some new developments don’t even allow buyers to have the units inspected prior to contract signing – and as you pointed out, it doesn’t even make sense here, as the building isn’t even finished. Overall, I would say just to be very, very careful in buying into a brand new building – there will be problems, both construction-related and otherwise (expect that your common charges will be increased by 10% – 25% in the first three years of ownership – those projected budgets in new construction offering plans are ridiculous. It’s safer (and cheaper, as the developer will probably try to get you to pay all or a portion of his closing costs) to wait 2 – 3 years and buy a resale. If you definitely want new construction in Park Slope, there should be resales at the Crest and Novo, as well as 145 Park Place, all of which have gotten most of their kinks worked out (although the scaffolding up on the Flatbush Ave side of 145 Park Place worries me – why would a building this new need to have that much work done?). There was a nice unit recently at the Shinnecock on Union St., but that’s pretty expensive, too. There are usually availabilities at Boymelgreen’s various City View/Park View Gardens permutations on 2nd and 3rd Sts., as well as Bergen between 4th and 5th, as well.
Thanks all. The development has a preferred lender but we hare the upfront fees and the lousy rate. Anyone close on a new development without Fannie approval? It stinks because getting in early we get a pick of the best units but then we are one of the firsts so who knows what could happen.
Fannie actually wants 70% sold or in contract. You can try for a Fannie Waiver at 50% sold but that’s not guaranteed and many lenders won’t even apply for the waiver. There are lenders out there that will close with 33% sold as well.
Basically I’m saying just because a building will sell 50% doesn’t mean it will get Fannie Mae approval.
What bohuma says. You seem to know what you want. Stick to it.
You should stick to your guns and walk away. Fannie Mae will require 70% owner occupation, and at least 50% in contract before they close. The sponsor will not want these kind of restrictions. If the sponsor is doing a fake condo, i.e. just wants to sell 49% and rent the rest) they are clearly never going to be compliant. A non-compliant building will be difficult to finance, which in turn makes it difficult to resell if you ever need to.