new construction high rise, 20% sold, mortgage? (sale, real estate, condos)

[gagaliya]

Since we have many real estate professionals on this forum, i am hoping some can offer some advise.

The high rise condo is to complete in 6 months, builder wants a 10% payment now, and cannot offer any mortgage contingency in the contract. So basically what this means is if i cannot get a mortgage when it closes, i am out of 10%.

Now i have no problem getting the mortgage normally based on my credit / income, however i am not clear what the lender/government law is now regards to high rise condos, they change like everyday.

Will any bank/lender do a 30 year fixed with 20% down if the high rise condo is only 20% sold?

thanks, any insight will be appreciated.

[ghuber]

I would be very careful. Often you sign and contract, and write a check and the project does not complete or complete on time and you have no recourse of action.

[BobKovacs]

I'd tell them to go pound sand. They're only 20% sold out and they won't take a mortgage contingency? That's absurd. I wouldn't risk 10% on that- there's too many things that can happen.

[elflord1973]

Originally Posted by gagaliya

Since we have many real estate professionals on this forum, i am hoping some can offer some advise.

The high rise condo is to complete in 6 months, builder wants a 10% payment now, and cannot offer any mortgage contingency in the contract. So basically what this means is if i cannot get a mortgage when it closes, i am out of 10%.

Now i have no problem getting the mortgage normally based on my credit / income, however i am not clear what the lender/government law is now regards to high rise condos, they change like everyday.

Will any bank/lender do a 30 year fixed with 20% down if the high rise condo is only 20% sold?

thanks, any insight will be appreciated.

I take that it you've already considered the possibility that the other potential buyers will have the same kind of difficulty in obtaining financing as you, and that the bottom will fall out of the prices before it's 50% sold, leaving several units to be auctioned "Beacon style" in a fire sale (I'm sure it's a nicer area than the location of the Beacon but I refer here to the relationship between demand and availability of credit)

Then again, maybe the tightening credit environment is already priced in.

If you play this right, having a good down payment in a tough credit environment makes you the guy with the sharp elbows -- and in these parts, that's a virtue.

Good luck!

[mtoneil]

Sounds too risky. 10% is A LOT of cash to put up and potentially never get back. It would be such a waste. Is it really worth the risk of wasting all that savings if something goes wrong? And on new construction, it is very difficult to get financing. Often times you can only go through the "preferred lender", i.e. a lender which agreed to loan on the property ahead of time with the builder. And even that is not guaranteed (and there may not even be a "preferred lender" in this case, you'll have to find out).

ETA: I would say tell them you want the mortgage contingency or you'll walk. Maybe they are just bluffing or hoping no one tries to strong arm them about it. And if they don't agree, then walk away. Not worth it.

[gagaliya]

i did bluff but they wont budge on the mortgage contingency. Here's a bit more detail

1) the building is almost complete, topped off already, elevators in, windows all done. They are doing the interiors now. So the chance of it go unfinished is very low, since noone would walkaway at 90% complete.

2) the offer i got is very very good that's the only reason i am even considering doing this, comparing to the other buildings in the immeidate area, and those are older/much less fancy buildings. i guess it's a new construction, they are willing to even take a loss to get the units filled initially. Probably once it gets to 40-50% then they will slowly raise the price.

3) i spoke to a few local mortgage lenders, they say it should be fine, basically i will lock in the rate now and they make sure i qualify based on my info and we sign at closing 6 months from now.

I expressed same concern to the attorney and she's reviewing the contract now. I am curious does anyone know the details on the mortgage policy on high rise condo? it seems very convoluted.

elflord, beacon is slightly different because the units outside of that building are selling at 50% less, while for this building the units in the area are very close in price probably 5% less, but this building a lot nicer and in a slightly better location.

[BobKovacs]

Originally Posted by gagaliya

i did bluff but they wont budge on the mortgage contingency. Here's a bit more detail

1) the building is almost complete, topped off already, elevators in, windows all done. They are doing the interiors now. So the chance of it go unfinished is very low, since noone would walkaway at 90% complete.

They may not walk away, but they may start liquidating units at rock bottom prices. There are several projects here in Atlanta that are either done or close to done, where the first buyers paid $350-400k for their units, and the remaining units are now either being sold for $150-200k, or being auctioned with bids starting at $100k. Not a good place to be for those early buyers, especially when they don't have an "out" clause......

[gagaliya]

Originally Posted by BobKovacs

They may not walk away, but they may start liquidating units at rock bottom prices. There are several projects here in Atlanta that are either done or close to done, where the first buyers paid $350-400k for their units, and the remaining units are now either being sold for $150-200k, or being auctioned with bids starting at $100k. Not a good place to be for those early buyers, especially when they don't have an "out" clause......

yes i considered this and it is a very real possibility. but that means all the buildings in the area will also see such price reductions. You cannot have a brand new condo auctioning at 200k, while an old building next door with worse units still selling at 400k. So i am screwed as well even if i buy in an old stable building. The only recourse against such situation is not to buy right now. But that is a whole other discussion.

I think we live in very interesting times, where financial decision will have a significant impact on the rest of your life (especially if you are still young), now more than ever.

ps does anyone have any insight on the actual mortgage rules/policy on high rise condos in nj?

[gradstudent77]

Which building is this, or at least which city is it in?

[mtoneil]

Originally Posted by gagaliya

1) the building is almost complete, topped off already, elevators in, windows all done. They are doing the interiors now. So the chance of it go unfinished is very low, since noone would walkaway at 90% complete.

It's not the fear of going unfinished that scares us, it's the fact that they could start selling the units for a fraction of what you paid.

Originally Posted by gagaliya

3) i spoke to a few local mortgage lenders, they say it should be fine, basically i will lock in the rate now and they make sure i qualify based on my info and we sign at closing 6 months from now.

You can lock in a rate for 6 months? I find that hard to believe. If so I imagine there is a hefty (and non-refundable) fee for doing so. Most locks are 30, 45, 60 or 90 days. Maybe there are exceptions for this type of case. But trust me, from everyone I've heard, a new construction condo is the biggest red flag to a lender. I find it hard to believe that multiple lenders are being honest when they say it's no problem.

I expressed same concern to the attorney and she's reviewing the contract now. I am curious does anyone know the details on the mortgage policy on high rise condo? it seems very convoluted.

I don't think the mortgage policy is any different on a high-rise condo vs. low-rise condo. Sometimes the rate might be adjusted (for some reason they view one as higher risk than the other, not sure why), as I know they ask for this information when getting a quote on the rate. But I can't imagine the mortgage stipulations will be any different than any other type of condo.