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Neither a borrower nor a lender be…

October 9, 2009
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[THIS POST IS NOT YET COMPLETED]

So somewhere on this blog we need to have rants & ravings about the lending institutions and the economic climate of 2008/2009, and how we ever managed to acquire an old empty building, in desperate need of renovation, with “creative” use ideas when banks were buttoning up their wallets.

This seemed like the best place.

The beginning of our saga actually starts with our OTHER building project that never happened – Soda Water Studio – which you can read a few articles about by clicking here. (It’s a dead blog that never really took off – we spent most of our efforts on everything else except documentation.)

I think it was somewhere in early 2007 that our neighbor told us he was moving and that he’d be putting his house up for sale. He was going to Ohio to live with his family (he was near 70 years old.) I talked to Sue about maybe buying his house and use IT as a studio/workshop. While it didn’t really fit our ideal studio conditions, it seemed like something that could be interesting, it’s only two houses away (close enough for a wireless intercom to work) and the investment wouldn’t be too much. The bonus was that we wouldn’t have to leave a house that we really loved. The neighbor’s house was fairly insignificant architecturally, (a modified ranch house from the 60’s) so this would feel more like getting a “generic” building, and if it didn’t work out we could always renovate it and sell it. I hatched a brilliant idea: I’d ask him to NOT list it with an agent, we’ll work out a price, our other neighbors are lawyers and could work out the papers, and he’d save the 6% sales commission. Sweeeeet. (I even asked the lawyer neighbors and they said; “Sure!”)

So the next Saturday morning I walked into our local branch of Bank of America, my personal bank since 1990 (when i moved to St. Louis), and talked to them about getting a loan for a building. They asked me the usual details (DOB, SSN, annual salary: “One MILLION dollars…”) and then how much I wanted. Hmmm… not sure… I explained the situation; neighbor was moving, not on the market yet, I hadn’t discussed an offer, etc., so the loan officer got onto zillow.com and checked the address. She said it was worth in the lower 100’s, possibly $110K. I said I bet I could get a good deal (my brilliant idea from above). She said something like: “Well, why don’t we pre-approve you for a greater amount, so that you have some flexibility in negotiations; if it doesn’t work out you might be interested in another property.”

I kid you not: 20 minutes after walking into the bank, I walked out with a Pre-Approval Letter for more than a quarter of a million dollars.

Make note of this if you’re going to read on; consider this the pendulum swinging ALL the way to the “liberal” side.

I’ll be brief in the boring details why this brilliant idea never happened; it was four days before I finally got around to talking to the neighbor, during which he had a) already listed it with an agent, b) gotten four offers before he even had a sign out in the yard and c) was going to sell it to “a couple of young contractors that wanted to renovate it”. Crap.

~~~

Early 2008. Sue & I decided that we were going to get serious about finding a place, after 10+ years of saying “Wouldn’t that building be cool if…” and we set our goal of getting into a studio/workshop by January of 2009. That’s the general storyline of this blog, so I’ll get to the point of this post.

After many months and many buildings, we found & liked two properties being sold together; and we referred to that project as Soda Water Studio. Our financing woes began with that project. We decided we wanted to make an offer on Soda Water around May 2008; so we started calling banks for financing. Since we’re both architects, we had a rough idea what it would cost to renovate the buildings, which made it easier to give banks an idea of the overall cost of the total project we were considering (cost of purchase + cost of renovation).

Little did we know that everything would start sliding downhill from there.

The first call I made was to MY bank – Bank of America – and WOW – were things different. Construction loans: no longer available. “As is” purchase loan: they were not interested.

Over the next 4 weeks I talked to half a dozen banks; many of them wanted some kind of “plan” to look at, so Sue & I had to come up with a set of plans – basically some quick sketches of how what we planned for the renovation. I documented all of the banks I called in a small spiral notebook (unfortunately, I have no idea where it ended up) and initially used that notebook as a way to keep track of who said/needed what.

Our agent Mary had a friend that worked at a local bank – and she put us in touch with him. Let’s refer to him as “Matt” for this story. So I called Matt, he expressed some interest, so we scheduled a meeting. We reviewed the plans, interest remained.  I showed him some pictures too. For this Soda Water project, Sue & I decided that I would be the single individual for financing and ownership (we would become co-owners after the sale of our current house) so I filled out some preliminary forms and got the financing process underway.

Matt called me a couple times with some questions, and after more than a week, he says he needs to send this over to his commercial department. I asked why, he basically said “It’s not a house”; I asked “How do you define ‘House'”? He couldn’t really define it, but said “When I look at these pictures, that’s not a house.” Anyway, I gave in and said I’d talk to the commercial department.

So I spend another week talking with “Linda” in their commercial loan department. Explaining how we wanted to use the spaces, proposed renovation cost & schedule, etc. She had different forms for me to fill out. Almost two weeks later (and several calls between us), she asks “So what’s the name of your business?” “Huh?” (we don’t have a business.) Linda: “I need a business name to complete these forms.” Me: “Well, we don’t have a business.” Linda: “But you are selling art out of this place.” WHOA… Me: “Who told you THAT?” Linda: “I’m looking at your plans, and you have ‘Gallery’ listed…”  Me: OMG “That’s where we are going to hang ART that we make and that our friends make. We will not be SELLING anything here.”  Linda: “Hmmmmm… If you’re not running a business, why are you getting a commercial loan?” Me: (getting perturbed) “Because your residential group didn’t think this project can be a ‘house’…”  Linda: “I think I’m going to have to talk to Matt again, because I don’t think we can process this through our commercial department.

Back with Matt for another week of discussions. We mostly debate the “house” definition. I compared it to a loft renovation project. I told him of friends that live in a church that was made into condos. I tried to explain that “House-ness” shouldn’t be based on appearance. After that week, he flat out said that his residential group would not be able to take this project, but he would talk with Linda again.

Week #4 – chats with Linda again. Got nowhere fast; mostly waiting on her to talk with other higher-ups. At the end of that week, again, she said she was sorry and that she couldn’t help us.

😦

Of course I’d been calling other banks over the course of that 4-week discussion. I heard lots of “Oh, yeah, um, we don’t do construction loans anymore…” The continued bad news of the economy was also the background music to every phone call. (remember, it’s June 2008) When I brought up the subject of appraisals, a loan officer from a major national bank told me: “Oh geez, we don’t even make EYE CONTACT with the appraisers when we get on the elevator with them. We’re ot supposed to be talking to them anymore.” (That statement made relating to the “collaboration” previously between lenders and appraisers, when the appraisers use to ask “Well, how much do you want this house to appraise for?”)

I’m going to skip over the minutia of all the other banks. (You’re welcome.)

Because, with much disappointment and no good news about our building adventure/project, we went to my family’s annual week vacation in Florida, and it was then, while on the beach, I got a phone call from a loan officer at Chase who said that they could loan us the money! Woo-hoo! It was a pretty good deal; only 10% down, 2 year construction, pretty low interest. This was through the Costruction services branch out of Colorado.

We called our agent, told her we had financing, then started working out the offer we would make. I also asked Chase for a Loan Commitment letter. We would make an offer in

~~~~~

THIS POST IS NOT YET COMPLETED

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