Inside Third & Bond: Week 71


One bright spot in our dreary real estate world recently has been interest rates. Mortgage rates are very low and conforming loan amounts are increasing, which will be relevant for our studio and one bedroom sales and maybe even our two bedroom sales. Developers refer to the mortgages that our buyers secure as “end loans,” and there are numerous issues we’re always discussing in terms of end loans: getting project approval for Fannie Mae or FHA loans; deciding to work directly with a specific bank or mortgage broker; pre-sale requirements of different lenders; and offering buyers “forward commitments” through lenders so that buyers can lock-in their interest rate at the time they sign a contract for a period of time necessary to cover their closing date. (And some developers in truly desperate times spend huge amounts to pay down the interest rate of their buyers’ loans). However, there’s one juicy threshold issue we’ll discuss today: mortgage contingencies.

In the good ole days (for developers), providing a mortgage contingency in the contract for a unit in a new development was verboten...

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