Investors, Keep Your Receipts

I should be on my way to a closing right now.  Instead, I am blogging because the closing isn’t going to happen – not today, anyway.

Why?  Because my client, a first-time homebuyer,  is purchasing a recently renovated home in a transitional neighborhood – and, according to the underwriter on his loan, the home is worth too much for them to loan on.

The whole story?  Although the property easily appraised for purchase price, the underwriter is saying that the home can only be valued at the seller’s original purchase price plus the sum total of any receipts for material improvements that the seller can provide.  So much for sweat equity. 

So, what does this mean for investors, or any seller for that matter?  Keep Your Receipts.  Be able to prove, in writing, how much time and money you invested in the property.  And take tons of Before and After photos – the underwriter requested those this morning, but unfortunately the seller only had the After photos that had been taken for the listing. 

Hopefully this underwriter is an exception to the general rule, and this sort or requirement will not become commonplace, but, with the crazy way things are going right now, who knows what will happen.  Any documentation that you can provide will help your case – and hopefully help you keep your profits on the property.