This has happened to me more than a number of times now so it is important I bring it to your attention. Here is the scenario:
I am working with buyers looking to do a 10% down loan on a town home. Every time I write a pre approval letter I speak with their real estate agent, "Are you sure it's a townhome and not a condo? Do they own the land underneath?" This can be a major issue and there are developments with both town homes and condominiums and typically even the town homes are condos in these developments.
He assures me it's a town home. The listing agent calls and wants to be sure I can close the deal because they have had problems closing loans in the development (another blog possibly).
"Of course, what were the previous issues? Are you sure it is a town home?"
"Yes"
Okay. Time to order the appraisal. My appraiser looks at the plat map and public records and guess what? It's a condo. Borrowers do not want to put the down payment required for a condo.
I tell the agents it's a condo. So the selling agent calls the builder as he doesn't believe me. It's a condo. Time to switch to FHA. Yes an FHA condo loan in 2010. Fortunately it's approved by HUD and I can close the loan.
Now this is a three story unit (btw sold in 2007 for 725K now 325K OUCH!). I get it. If I were a real estate agent I would call it a townhome. If I lived there I would call it a townhome. But when a lender asks you what the property is you should probably know that it's a condo.
This always seems to pop up. Whether you are an agent, or a buyer, or a seller, know your town homes and know your condos. Your transaction depends on it, and if you feed the financing guy misinformation we all could be wasting time.
Very Truly Yours:
LittleFish
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