Dealing with Lenders When Buying or Selling Crested Butte Home
Most homes in Crested Butte are sold through cash transactions rather than via traditional loans. This is because Crested Butte is a second-homeowner market, and many affluent buyers either have the cash, or will leverage their investment portfolio through a line of credit. But there are definitely still buyers who are using traditional loans to buy their dream Crested Butte home. If you are a buyer looking to buy your home with a loan, or a seller that sells to a buyer with a loan there’s a few things you should know. Here is information on dealing with Lenders when Buying or Selling Crested Butte home.
Furnished Homes and Lenders
You will be dealing with Lenders when Buying or Selling Crested Butte home that is furnished. Quite a few homes in Crested Butte or sold fully or partially furnished. But, furniture has legs. Lenders do not want to loan money on stuff that can walk away. Fixtures are anything that is attached to the home. Examples of fixtures that will usually stay in the home: a range, a built-in microwave, a dishwasher, a water heater, a furnace, a flat-screen TV mounted to the wall, surround-sound speakers built in to the wall, window blinds, carpet, etc. Things that will go are things that aren’t affixed, meaning not nailed, bolted, glued, wired, built-in or cemented. Examples of personal property that will likely not stay are: a washer, dryer, refrigerator, free-standing flat screen TVs, free-standing speakers, drapes, rugs, etc.
As described previously, the devil is in the details, and it is best to be very specific so there are no surprises! If the buyer getting a loan for the purchase of the Crested Butte home, the contract that the lender receives should not show the long list of items on an inclusion list as an attachment to the contract. The contract especially should not call out the value of the said furniture and furnishings. One solution is to create a separate bill of sale for the items to be transacted after closing.
Condotels and Lenders
Another time you might be dealing with Lenders when Buying or Selling Crested Butte home is if that home is a condo or condotel. A condo that can generate rental income when you are not using it can be great. There are many condos at the base of ski areas that fit these criteria. Some are literally converted hotels that were remodeled with kitchenettes. If a property is rented on a short-term basis and has a front desk, has maid service and other “hotel-like” services, lenders classify these properties as “condotels”, literally condo + hotel. They are not keen on lending on these types of properties because they are non-conforming or “non-warrantable”. Non-warrantable meaning that the loan will not be bought by Fannie Mae or Freddie Mac; therefore, most mortgage lenders will not lend on a non-warrantable condo.
Non-warrantable Properties and Lenders
The justification for this scrutiny by Fannie Mae and Freddie Mac is they want to only buy loans where 100% of the value of the loan is represented in the real estate tied to the loan. If there are other amenities or third-party business that affect the value of the real estate, then the loan is not as secure. Here are some of the other reasons why Fannie Mae or Freddie Mac cite some condo developments may also be classified as non-warrantable:
- New project with limited sales
- The project is in some sort of litigation
- The condo project is incomplete
- The builder, developer, investor, entity, or person owns multiple units
- Shops and/or restaurants within the condo project
- A builder/developer controls the Home Owners Association
There are lenders who will finance the purchase of these properties including local banks. But you will find that rates are higher, and/or there may be a three or five-year adjustable rate increase. This is not an issue for a cash buyer, but it can affect the ability to purchase by a buyer who needs a loan. For the seller this may become an issue because it may also extend the time it takes to sell a condotel. This is due to the fact that there is a smaller subset of willing buyers.
Dealing with Lenders When Buying or Selling Crested Butte Home Final Thoughts
If you would like to know more about dealing with lenders and what to consider when buying or selling your Crested Butte home, contact me.
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Coldwell Banker Mountain Properties