Spring Break
Run, don't walk away from 'unsellable' purchases
Jessica White/DC Columnist
Issue date: 5/11/08 Section: Business
Dear Ms. Mortgage Maven,
I saw a condominium that I just love. It is larger and nicer than all the other units I have seen on the market. I put in a $1000 deposit to hold it at the current price because prices are going up this week. It is in an eight-unit complex. Two of the buildings are new condo conversions, the other six buildings are rentals.
I am in the military and wanted to use a Veterans Administration loan to buy the property. However, I just learned, after visiting the sales office several times, that I have to use one of the two lenders approved by the seller. Even though these are both major, national lenders, neither of those lenders will let me use a VA loan. Also, I only learned now that not only can I not use my VA loan, I cannot use an outside lender at all (but I do get a 3% seller concession for using one of the two approved lenders). I do not know what to do. I really want this condo but I am feeling betrayed since I have spoken to the people in the sales office several times and no one ever explained all of this to me. Can they require me to use their lender?
Mr. Z.
Dear Mr. Z,
The most important item of information you used to describe your situation probably seems the most insignificant to you - two of the buildings are condo conversions, and six of the buildings are rentals. Why is this significant? Because Fannie Mae, Freddie Mac, FHA and the VA requirements for condominium projects limit the number of rental units. If the number of rental units is too high, the project will not meet their loan guidelines or mortgage insurance guidelines. I think this is the real reason you are limited to using the condominium projects approved lenders - the units will not qualify for financing from any other source.
The most important question is if these units will not qualify for traditional financing, how will you sell your unit and cash in on your "equity?" You can bet your property will be assessed for tax purposes, and assumedly, over the years, the "value" of your property will rise, but if no one qualifies for financing to buy the property when you want to sell, what is the real value of your property? In my book, it is practically zero. People need financing to buy houses, plain and simple. No financing, no sale.
I saw a condominium that I just love. It is larger and nicer than all the other units I have seen on the market. I put in a $1000 deposit to hold it at the current price because prices are going up this week. It is in an eight-unit complex. Two of the buildings are new condo conversions, the other six buildings are rentals.
I am in the military and wanted to use a Veterans Administration loan to buy the property. However, I just learned, after visiting the sales office several times, that I have to use one of the two lenders approved by the seller. Even though these are both major, national lenders, neither of those lenders will let me use a VA loan. Also, I only learned now that not only can I not use my VA loan, I cannot use an outside lender at all (but I do get a 3% seller concession for using one of the two approved lenders). I do not know what to do. I really want this condo but I am feeling betrayed since I have spoken to the people in the sales office several times and no one ever explained all of this to me. Can they require me to use their lender?
Mr. Z.
Dear Mr. Z,
The most important item of information you used to describe your situation probably seems the most insignificant to you - two of the buildings are condo conversions, and six of the buildings are rentals. Why is this significant? Because Fannie Mae, Freddie Mac, FHA and the VA requirements for condominium projects limit the number of rental units. If the number of rental units is too high, the project will not meet their loan guidelines or mortgage insurance guidelines. I think this is the real reason you are limited to using the condominium projects approved lenders - the units will not qualify for financing from any other source.
The most important question is if these units will not qualify for traditional financing, how will you sell your unit and cash in on your "equity?" You can bet your property will be assessed for tax purposes, and assumedly, over the years, the "value" of your property will rise, but if no one qualifies for financing to buy the property when you want to sell, what is the real value of your property? In my book, it is practically zero. People need financing to buy houses, plain and simple. No financing, no sale.
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