Lender denied loan due to “unmarketable” property

[Megan Stateler]

Looking for any advice please. After 90 days of escrow, my lender said my loan would not get approved due to “lack of marketability” of the investment property duplex based on appraiser not able to find any comparables sold in the last 12 months. Was looking to do conventional financing with 25% down for an investment property. The property is approximately 70 ft from a small electrical substation in a neighborhood of other duplexes in Florida. It’s a great deal and has years of solid rental income. It’s also across the street from an elementary school (caddy corner to the electrical substation). The seller has now offered to do seller financing as the lender has suspended the loan. Because this is my first deal, I’m hesitant because as I understand it, owner financing is predicated on finding financing prior to the balloon payment due. My question is: does anyone have any experiencing getting conventional financing for a property with similar characteristics or other un-marketable characteristics?

[Caroline Gerardo]

If there are no comparable sales in 12 months the lender can't sell the loan. Did you call Realtors in the tract to see if they knew of any comps? You could ask for another appraisal (pay for it) but if there are no properties with square footage within 10% and lot size 10% and condition then you don't know what it is worth to meet Federal Laws which the GSE's stand by.   Ask the seller to carry a 25 year loan at 6% amortized over 25 with no balloon no prepay. Seller gets decent return and have a clause that you will notify them 30 days in advance if you intend to sell so they can plan for income taxes. Carrying a note for the seller is a pain in the accounting but maybe helps them avoid capital gains for a while if they bought a long time ago.  There are other lenders who may do this loan at higher interest rate without the comps.