Family member looking for six months for inexpensive (aka under 1 mil) condo. Finds a pretty good one. He is winning bidder out of 6 – over list. All good. Major bank says they have loaned to 3 units in this building so no prob having no finance contingency. He has enough cash so no prob there anyway. So escrow moving along and now bank says they can’t get answer they need from HOA on owner occupancy/rent ratio. Building has some issues but is very pleasant and has a lot of long time owners plus newer folks plus renters, location is perfect heart of everything and walkable, unit is nice and can be inexpensively made even nicer, so family member is psyched. Good starter condo. Anyway, bank saying don’t buy if we can’t give loan as it’s risky. But family member can pay cash and close and face it – it’s brutal out there. Nothing to buy. Fami,y member has lost repeatedly to multiple offers and finally he’s the winning bid. So, should he walk or pay the cash? How risky is it if bank won’t loan? And if they won’t loan today, he might be able to refi tomorrow? Please advise. We are hand wringing and don’t know how to evaluate risks.
Personally I think the market is on its way down. 10% to 15% maybe 20%. But who knows how long that will take. Could be a year, could be 5 years.
Do they need a place to live? And they have the cash? If so I wouldn’t care what the bank thinks, as long as they could be happy there 5-10 years. Because in the long run, who cares if there is a short-term dip in prices.
If it is for investment purposes…I dunno. My gut tells me it is not the time for investment purchases. But what do I know.
You say the building has some issues. What are their reserves? This might be the reason the bank is concerned re rent/owner ratio. Even if you pay cash, if the whole complex needs a roof or plumbing, etc. you might be in a situation where there is not enough owners liquid enough to pay for it. ie. special assessment.
When you say reserves are good, what do you mean? Personally I think we are in a 2006 moment. Mostly because nobody is selling. That should be a strong tell not to buy, buy lemmings gonna lemming.
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