Some sellers of New York City apartments are lining up mortgage lenders for potential buyers well before an offer is made, the New York Times reported.
Sellers are securing financing for an eventual sale even before they put their condos or co-ops on the market, and later add language to the sales contract that requires buyers to, at the minimum, obtain preapproval from the seller’s preferred lender.
This pre-planning can save sellers the hassle of dealing with buyers who can’t pull together financing for a purchase, Rolan Shnayder, director of new development lending for H.O.M.E. Mortgage Bankers in Manhattan, told the Times. “Never is there going to be the excuse that I went to the bank and I was a great credit risk but they wouldn’t approve the building,” he said.
Securing the lender and then adding the preapproval language does not mean that the buyer is locked in with that lender, Neil Garfinkel, a Manhattan real estate lawyer, told the Times. The buyer can still approach another lender for a mortgage, but if it falls through, “they agree to apply to this source which we know will lend in this building.”
But preapproval for a mortgage is not a sure sign of an application getting through the process, Daniel Gershburg, a real estate lawyer who frequently works with buyers, told the Times. Developers’ preferred lenders, for example, may hold up applications long enough so that a buyer’s rate locks expire, racking up additional fees.
“Once you’re at the whim of this lender, if they don’t follow through, there’s nothing you can do,” he said. [NYT] —Hiten Samtani