Expect the unexpected. Pam, who has been successfully investing in real estate f

Question

Expect the unexpected. Pam, who has been successfully investing in real estate for years, receives some unpleasant news from her current lender. Despite the fact that property’s cash flows, her personal credit, and all other aspects of her profile as a borrower have only strengthened since the lender initially approved the loan several years ago, her lender reports that the bank will not even consider renewing her loan at this time. It’s already early-December and Pam was hoping to close on the refinance before the year-end. Q2(a). Based on the information provided, what is most likely happening here and what specific advice would you give Pam? Q2(b). Pam decides to seek out another lender. As expected, the new lender finds she has a valuable portfolio of real estate assets, strong cash flows, and great credit. Unfortunately, the appraisal for the property she’s refinancing came in too low. “I’m afraid this property just doesn’t provide sufficient collateral for us to issue the loan,” her lender says. What specific strategy might help Pam close this loan despite the appraisal issue?

Explanation / Answer

A)

Here two things seems to be at work.

Pam is continuously refinancing the loan again and again, instead of making timely repayment

OR

the value of the property has declined significantly since the original loan, it might be a buyer's market

Here Pam should try and make the repayment by bringing in more collateral, so that the value loss could be compensated.

B) Pam can bring in the difference in cash,

Pam can go for a second appraisal

Pam can give additional collateral to compensate the loss.

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