Financing difficulties for Pre-Sale condo in today's market
The developer's price of 2 yrs ago - against today's financing. There are several hundred examples of the pre approved purchaser now being unable to qualify, or needing to come up with a substantially larger downpayment, because the bank will only lend on 80% of the current appraised market value.
One of many difficulties pre approved buyer's are facing, is the current price of the pre sell condo and the banks demanding today's current market appraisal.
For those who don't have any employment and used to buy property with equity loan. You will be in trouble. Banks have taken away this program.
For those who are employed, pre-approved at the beginning of the purchase which means 2 yrs ago, with strong credit background. You will have a much greater exemption that the bank will still grant the funding even though the current market value is lower than the time you purchased.
Look what happens to the downpayment requirements if the buyer does not walk away - it increases substantially. Using $500k an example, 2 years ago, buyer prepare to come up with $100k down payment. Unfortunately, the current appraised value might only worth $400k. 80% of $400k is $320k. For conventional mortgage, bank will only loan 320k to the original $500k purchased price property. Buyer has to come up with extra $80k down payment. Therefore, in order to complete the deal, buyer has to come up with total $180k down payment.
Imagine the buyer's frustration when he hears of the developer, who will not let him out of his agreement but, at the same time, is currently discounting and marketing his units, in the same building, at up to forty percent off. Oh brother!
Considering the above, how much time does the buyer have to make a decision?
Meanwhile, the developer's ace in the hole, is the threat of a law suit - claiming the purchaser has previously signed an agreement and has a sum of money on deposit - no assignment.
What will happen to the deposit if the buyer chooses to simply walk away? Oh boy!
Well, the bottom line is developers want to sell and buyers want to buy. I'd highly recommend buyers go back to the developers renegotiate the new purchase price so everybody can be in Win-Win situation.
