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You are here: Experts > Shopping > Home Buying/Selling > Real Estate Home Mortgages > Construction to end loan mess
Expert: Brian Beardsley - 10/29/2009
Question
QUESTION: In Sept of 2008 we were approved for a construction loan to put a manufactured home on a basement. The time frame was four months, closing to be Dec. 27, 2008. This was completed on Dec 21. The broker was called and we were told it would take another six weeks before the End lender would have the paperwork ready for us. We were to just keep making the interest payments until then. We received the paperwork, they ordered an appraisal. The appraiser backed out, lender called us, said they ordered another appraisal, this appraiser backed out also. Both backed out because they could not find any comparible properties, they both went back 18 months and went 22 miles and could not find one comparable property. This left us with a denial from the end lender. The Broker and the Construction Loan Co. told us that they had an appraisal done. So now we are left with a new home, on land, along with our original home that we used for collateral, and no mortgage! Where do we go from here? How will we ever get loan without comparison properties?
ANSWER: Thanks for your question - Where is the appraisal that the broker and construction claim they had done? Have you seen it? What has the construction lender said? You may be able to negotiate something with them - If you can't supply an appraisal satisfactory to the lender, you won't be able to secure an end loan - Did you rely on information supplied by the seller / broker / construction company about comp sales, new subdivisions, etc? The manufactured loan market is very restrictive, and normally require a 6 months / 1 mile rule....
---------- FOLLOW-UP ----------
QUESTION: We have never seen the appraisal. We have requested several times to no avail. The construction lender has been very cooperative with us, after we got the Attorney General involved, but they have sent us a paper to sign for us to start making installment payments instead of just interest payments. We have been paying an extremely high interest rate for a year now, they said they would drop it down to 6.5 and we could make payments to them until the broker can help us secure the end loan. I dont know what is happening now though, because we told them we would not sign the addendum until it included the promised interest rate and the fact that they were willing to work with us and the broker. Do you think that we are asking too much? We did not want to sign this, only to be told after the fact that this was not what we agreed upon. The paper mentioned nothing. We relied on everyhting they said. The seller, broker and construction company are all one entity. They all work for the Manufactured Home Dealer. We dont know where to go from here.
Answer
Sorry for the delay in responding - # 1 If they have an appraisal, they are required by LAW to provide you a copy of it. Do not sign ANYTHING - I HIGHLY recommend that you contact a qualified real estate Attorney - It sounds like the broker / builder have worked together to sell you the property and you relied on information provided by them to purchase the property - If they are true "professionals" they would both know that there were no comps - How did they decide the purchase price? What was their basis for that? Square footage? Is there a clause in the construction loan paperwork that states when you need to obtain permanent financing? What are the ramifications of you walking away? Has the Atty General offered any advice? You can't rescind a purchase of real estate or loan (only a refinance) - Your other home is cross-collateralized as well? If they are willing to lower your rate to the 6.5% rate, i would take advantage of that, as long as they don't add any other verbiage restricting your time frame - I'd really consider finding a real estate attorney...
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