Can't sell the property - Help!

[rjack]

I have some close friends that have a serious real estate problem and they are asking my advice. I'm not really a real estate expert, but I do know something about mortgages since I used to work in home mortgage lending at a bank.

Below is a description of the problem in there own words.  Can you guys please, please give me suggestions?

Here is the somewhat quick version: When my mom died, she left her estate to be split between my brother and I, with me as executor to determine what to do with the condo. She still had three years left on a 15-year mortgage, so we have been paying $900/month on the mortgage plus $300/month condo fees, which is difficult for us to continue much longer. We put the condo up for sale in November, got an agreement of sale with a buyer for $215,000 in April, they applied and were qualified for a mortgage, and were scheduled to settle in June. About two weeks prior to settlement, we learned that the condo building could not be approved by Fannie Mae due to having more than 20% retail space (it is 33% retail). So no traditional lender will approve a mortgage (if they want to resell the mortgage) without Fannie Mae approval, severely limiting our sales options. The buyer still wants to buy the property, and looked into other financing options; some community banks were willing to make loans, but with shorter terms and higher rates that the buyer was unwilling to consider. They asked for seller financing, but we did not want to offer that. Meanwhile, there was another option for getting Fannie Mae approval that was being explored and we were just waiting. Yesterday I got a call from our realtor (who is also the agent for the buyers) saying that this other option would not be decided until at least the end of the year or later. There is a second condo in the building that was a foreclosure and was put up for sale after my mom's; it has a contract and will settle in mid-November for what the realtor understands is a very low price to a cash buyer. She is concerned that if we don't sell the condo until after that one closes it will negatively affect the appraisal value of our condo. Our buyers are planning this weekend to come up with some numbers for making seller financing work for us and hope to get that to us on Monday or Tuesday. Meanwhile, I made some calls yesterday, including to our accountant, who connected me to a mortgage broker at Franklin Mint Credit Union who said they might be able to offer a 30 year mortgage to the buyers, so I have connected them and am hopeful that they will be able to get a traditional mortgage. If they don't, I would like to be prepared to evaluate seller financing and whether it is an option we would consider, what the financial implications would be, etc.

[arebelspy]

I'm not quite sure what advice is needed.

Talking to that credit union to see about having them qualify potential buyers seems like a good route, and seller financing seems acceptable, unless they need the cash right now for some reason (instead of carrying the note and paying it off over time).

In other words, I think the path they are going is the way to go.

Do they have specific questions about seller financing?

[happy]

Worse case scenario and the saleprice drops : What would it rent for? Is this a better option?

[rjack]

Do they have specific questions about seller financing?

I think the buyer wants a traditional 30 year fixed mortgage. Given the low interest rates now and the likelihood of inflation increasing, it does not make sense for the seller to take this risk, correct?

[johnnywill08]

Doesn't the conflict of interest of the Realtor reppin both sides concern you?  I'd get my own, that's a potentially huge error in judgement, sorry like to play devil's advocate,.

 Good luck!

[arebelspy]

Do they have specific questions about seller financing?

I think the buyer wants a traditional 30 year fixed mortgage. Given the low interest rates now and the likelihood of inflation increasing, it does not make sense for the seller to take this risk, correct?

You set the interest rate and terms.  8% interest only with a 3 or 5 year balloon is reasonable.

[Another Reader]

The fact that your friend put the property up for sale last November and did not get an offer until April means the property was likely overpriced.  Most buyers were probably steered away from the project by more knowledgeable agents because those agents knew the project was not qualified for Fannie Mae financing.

I personally would not carry paper in this situation.  Once the cash sale on the foreclosure goes through, your friend's buyer is not going to be happy.  Your friend and his/her brother are still going to be entangled because of the loan payments.  This could become messy and uncomfortable if there were to be a problem with the buyer.  In addition, short term seller financing won't work.  The buyer won't be any more able to get a Fannie Mae loan in 3 to 5 years than they are today unless the rules change or the market improves to the point owner-occupants are buying into the project.  Your friend is just kicking the can down the road.

If I were going to be in business with my brother, I would want us to be in control of the property.  I would therefore consider renting the property as a co-owner with my brother if it made financial sense to do so and if I thought the condo market in this location was going to improve quickly.  However, if the only sale in the project in a year is for cash to an investor, that's not a good sign.  It's also one more unit keeping the project from qualifying for Fannie Mae financing.

Based on what was written, I would be unhappy with the agent.  Dual representation is messy in any situation.  Having a contract drag on from April to the end of September is ridiculous.  Has the property been marketed in the interim?  If not, shame on that agent for not putting the unit back on the market.

In your friend's shoes, I would talk to my brother about cutting our losses and putting it up for sale for what an investor would pay for the property.  That's the buyer pool.  And I would seriously think about finding an agent that can get the job done.

[parkersharon32]

Better way, your friend need a good lawyer as this is a deal regarding the property as he would not suffer any loss on the deal.

[richschmidt]

So, now that this thread has been resurrected.... What happened with your friend's situation?

[rjack]

The final outcome: The owners helped find a bank that would do a non-Fannie Mae loan. The buyers got the mortgage and closed on the house about 60 days later.