If it’s been awhile since you shopped for property, brace yourself for some changesâ€”not just in the shopping stage, where REOs and short sales definitely bear consideration, but also in securing your financing.
What worked in the past may or may not work in the present, with new guidelines in place and more distinctions between lenders and their individual requirements. But sometimes a little creativity, or even a few more phone calls can go a long way.
I’m working with a very successful investor client, who hasÂ weathered our current storm with a buying strategy that I’d call cautiously aggressive. She has eight properties in three states, and has timed her purchases not with the market, but by the individual deal. She put between 20 and 80 percent down on each, ignored the sirens sung by ARMS and other programs she calls “foolish” (her words, not mine), and made her money on the buying side. She has a positive cash flow on each of them.
She has significant liquid assets, and has never been late on a mortgage payment. She is a lender’s dream.
She has decided to move to Maui full time. Last week I showed her a split-level home with an income-producing ohana (both of which are in need of a some owner-love)Â in a great neighborhood, and she liked the fit.
Yesterday she called her primary lender, Chase, which holds four of her mortgages. They politely told her that as much as they appreciated her business, they didn’t want any more of it.
I made calls to two on-island lending sources, both of which have performed well for my clients in the past, and hit the wall — too many mortgages.
I spoke with the selling agent to explore the possibility of owner financing, which proved not to be an option. He suggested, however, that I contact Steven Magnum, owner of Pacific Home Loans (808.283-4518,Â email@example.com). Magnum has been in the business for 10 years, and has found success in offering strong service and trying to crack difficult situations. He didn’t tell me that — others did.
It proved an unexpected eye-opener: the sources with which I was comfortable had no choice but to shut the door on the deal, and it was dead in my mind before I spoke with Steven. Turns out he has a source that is still using the old Fanny Mae guidelines (up to 10 mortgages), and that can fund at competitive rates.
In my digging around, I also spoke with Tricia Morris, owner-founder of Premiere Mortgage. I’ve seen Tricia pull whole families of rabbits out of her hat in the past, and she told me about a new tact she’s taking that has helped her close several deals in the past few months.
It’s a new approach to an old model: the Agreement of Sale. “There are sellers that very much want to sell, and qualified buyers that very much want to buy,” she said. “Unfortunately, in these times the system can’t necessarily put them together.”
By undertaking the transaction from a somewhat neutral perspective, structuring the entire deal, and working with both buyer and seller directly (and their representation), Tricia closed two $1M-plus properties last month on Agreements of Sale. Everyone won: the seller got a strong price for his property, the buyer was able to purchase a home for which he was qualified but could not get a loan, and the agents put a deal together that was impossible using conventional financing (and thinking).
Premiere first makes sure the deal makes good sense from both sides, structures the deal, services the debt, comforts the parties involved, and essentially guides the transaction as they would any other funding.
It makes far more sense, and feels more comfortable to the parties involved, than if the buying or selling side puts it together. Obviously she has a vested interest in putting the deal together, but her professional expertise and reputation — both of which are enviable — establishes a zone in which comfort and trust come together. “It actually works better if the agents sort of stand back and let me do the work,” she says.
You can reach Tricia at 808. 874-8800, or firstname.lastname@example.org.