BRRRR update - underwriting complications (new experience!!!)
I had a recent experience with a lender that baffled me and wanted to share. I purchased a 40K home that was being used as a college rental. Based on doing prior deals with the seller and his motivation to liquidate his portfolio, we got this house at a steal (tax value 105, appraised for 110K). The only rehab work was to do a termite treatment, replace some damaged wood, and add a new roof (~ 10K in repairs).
My first hurdle was to find a lender who would forego seasoning requirements and lend to my LLC (my prior local lender recently change their policies - another story for another time). Finally found one through a mortgage broker and thought we had things all set. During underwriting, the lender tried to balk because they couldn't fathom how I paid so low and appraised so high with little repair costs involved. Ultimately we got it resolved after jumping through a few hoops. The crazy part was that the lender selected the appraiser!
Overall, things came together and for a 10K investment using seller financing (promissory note set up for the balance), I will be able to come out of the deal with about 35-40K of new capital (after repayment of the promissory note and reimbursement of my repair money).
Questions for BP - has anyone else experienced anything like this during underwriting?