we got a commitment letter that was lower than we expected. Instead of getting $1,950,000 we only got $1,820,000 which means that we will need to come with additional $130,000 for closing. When we understood that the reason for that was they thought that $750 rents are too high for this area and they re-calculated the value (based on the NOI) with $725 rents we knew that we can show them that even the $750 was very low comparing to the comparable rents in the area for similar properties.
We asked for a call with our focal point at the bank. We were told that this is a final decision and he couldn’t remember any case in the past 20 years that a decision was changed after the commitment letter was issued. Our answer back was – “so that will be the first time…” and we were not kidding about it! We have also mentioned that with this additional money that we will need to put down, the profitability of this project isn’t worth it. We told the guy up front that if that will be the final number we are considering to drop the deal.
You need to understand… the bank is in the lending business. They have spent already time and resources on this deal and they also have no interest in letting this deal go.
At this point, we have asked him to go back to the committee and appeal the decision. We have also sent an official letter appealing the loan amount. In our letter, we have pointed out that the appraisal that was ordered by the bank mentioned rents of $750 per door. In addition, rehabbed properties in the area are rented for $775 per door. We also were able to get a letter from a leasing agent in the area stating that those units after the rehab will be rented for $775-$800. We have attached this letter to ours.
We were not sure if the message will pass to the management and we were ready to call the Bank VP if needed – there is no chance that this deal will fall through because of that.
A week after we have sent the letter we got a call from the bank – “your loan was approved based on the original numbers” a sigh of relief on our end. WE DID IT!!!
Next thing is closing…