Interest Rate VS Impact
Last week I closed on a transaction that had so many bumps in the road I had to talk about it. He has been at the location in excess of 20 years. My client has a very successful mechanic business located in Mamaroneck NY. His client base stems from the MTA to tow truck companies to dealerships in the area. The client does in excess of a few million dollars a year in revenue. He had a very good relationship with the landlord, that did not want to sell the real estate to my client. But since they always had a good relationship, it was never an issue. This had never been an issue until the landlord passed away. The heirs to the estate only saw this as a payday and immediately moved aggressively against my client upon getting control of the property. They started raising the rent and told my client they wanted to sell the property. For more than the market value. The client went to his attorney distressed, as I said before he had a good relationship with the ( now deceased) landlord and was making a very good living. His main fear was that if he moved, his client base may not come with him and with major clients like the MTA- that could change his financial situation. He went to his local bank and they denied him. He went to three banks and they all denied him. His attorney called me and on conference call we discussed the deal, I told him that this was a tough property to finance. Upon running credit I saw he had multiple mortgage late payments on one of his investment properties. ( He had 3 other properties besides his primary residence) But the mortgage that had late payments, was a property that he had given to his ex-wife ( legally) In the process of their divorce. She promised to get his name removed from the mortgage and title under a certain time domain. All of this was outlined in the divorce agreement.
That being said is FICO was affected and was low. ( Obstacle #1 )
The seller wanted to close this transaction and not give a mortgage contingency- this is a standard clause in NYC to protect your down payment during contract (Obstacle #2)
Once we submitted the loan and I spoke to committee we agreed to do the deal. We ordered appraisal.
Appraisal came back below the sales price. This is called – appraisal being short in the industry. (Obstacle #3)
HGRN Provides solutions
I was able to get client a loan due to the fact that his income was proven on his tax returns, but his interest rate was affected by his FICO score.The seller agreed to hold a second mortgage for the balance after I presented the idea to the seller and structured it for them. His new payment ( with both loans) was less than what he was paying for rent. He now controls the real estate of his very successful business. That is the true impact to this transaction. He secured the land where he is making money and building equity and appreciation as he continues to make money. He is now winning in multiple ways. I spoke to client and told him once ex wife takes him off the mortgage, we can restore his credit and refinance and lower his rate significantly which will further lower his payment. More cashflow so he can reinvest in his already successful business. The impact on this transaction has so many positives to it, the client could not believe we made it happen.