Working with Mr. Newbie Lender - What I learned the hard way.
I recently put a 10 unit $810,000 MF unit under contract and was eager to secure financing for the project and was persuaded to let a new lender obtain approval at his local community bank. The guy indicated he was new to the bank but would work closely with the his Boss (CFO) to ensure the lending was approved for my purchase. Well as many of you know when working with a new lending relationship the amount of documentation required by the lender is no small sack of potatoes. There are four members in the buying partnership so I had to heard cats numerous times to get the new lender all the financials, bios, etc. that he requested for the three other partners and myself.
After my 60th email to him responding to yet some other small bit of information he needed before presenting the deal to the loan committee I began to get worried. I repeatedly asked my new lender "Are you getting feedback that this deal is something your bank has an appetite for at this time" and his response was "oh yes, don't worry I am your man on this transaction".
After 3 weeks he took the request to loan committee and I was anxious to hear the response. He called me later that afternoon and I could tell by the sound of his voice he was disappointed. He indicated that the loan committee neither approved or denied the loan but instead asked for some more detailed information on the property (that I had already previously provide of course). He indicated he would take the loan back to committee the following week for approval.
At this point I was already thinking "why did I ever give this guy a shot" !
After the following week's committee meeting took place my newbie lender called me up with a tone of complete despair in his voice. He told me that he was sorry but the bank had decided not to partner with on lending. I inquired Mr. Newbie Lender.... please explain why because the financials of the buying group is solid, the cash flow of the property is adequate and the property is located in a highly appreciable part of town???
He indicated the committee turned down the project due to the age of the building. I hit the floor. All of the buildings in this part of town were built in the 1950s and are solid older structures. I simply thanked him for the call and hung up the phone.
Now a month after I am UCT and 3 weeks till the contract close date I am scrambling to get the financing in place.
Lesson learned - Just because a vendor, lender, contractor says they "are your man and will get the job done" be fearful to tread new relationships on larger deals. Next time I try a Mr. Newbie lender it will be with a small project so I hoepfully I will get a few less gray hairs.