I have a commercial bulding that the buyer's mortgage company is saying the interior needs to be built out. There is 3,000 of a former drug store and beauty shop open sapce.The owner's previous tenants left and the owner had started to take down the interior walls so a future tenant could do as they want. But the appraiser told the bank it's a wreck and the bank wants the walls and ceiling back up. The owner has 0 money for this. How can I work it out with the mortgage company? Should the buyer pay for this work prior to closing? It is his mortgage company. But how do I make it comfortable for all concerned and still get the mortgage company to go forward?

did the owner have a permit to tear down the walls and ceilings?

if the buyer is willing to pay for this prior to closing, then why not make the difference up by reducing the purchase price based on the construction costs and holding costs to get it up to par. since the owner has 0 money to fix this problem, its a give and take situation.

what's the cap rate? how much is your buyer putting down? maybe you can negotiate this with the mortgage company to escrow the remaining balance for construction?

$14,500 NOI, Selling price $475K Deposit of 100K
Because of this question I'm trying to learn the cap rates but I didn'tknow what to do with the $100K, I figure the selling price would be $375 with thatit would be 3.9% ? Don't know what I"m doing....thanks...sorry

youre the agent representing a buyer right?
how did you determine your NOI?

14,500 / 475k = 3% Cap rate

putting down $100k will help the cash flow and increase your cap rate.

you goal is to achieve a 10% cap rate to balance cash flow and the risk levels.

can you find out whats the market cap rates and comparables for this building?

Dual agent. Deducted Taxes, expenses,insurance,etc.

You need to request another appraisal sounds like the appraiser should have skipped that extra drink for lunch.

I have never heard of an issue such as this on a commercial retail space.

Interiors walls are not structural and are commonly removed and reorgainzed with the owners permission to suit the new tenants business.

Does the future owner want the existing layout or was he planning to change the interior layout? If he was planning a change he needs to talk with his bank regarding the appraisal.

The future owner wants the walls out as he's putting in a estaurant. I will request another appraisal.

Dont waste your money on another appraisal, it is what it is. The easiest thing to do is find a lender who understands the situation and will work with it in its current condition.

From personal experience I will have to disagree with you. If you want to get very technical it is what it is within say + or - 5% and those are the facts. Switching lenders may be more difficult than getting a new appraisal.

Since the new potential owner plans to demo the interior because the design is not suitable for his restaurant. His lender should be aware of this unless his head is up his ass. So the interior non-structural walls are of zero value to the property and if the appraiser was a professional commercial appraiser instead of a hack then he would have known that as well.

It sounds like the appraiser has limited commercial experience. If I were involved in the transaction I would suggest he go back to residential.

What I mean is, the right lender will read right through whatever wording is in the appraisal and see exactly what is going on. Normally, an issue like these interior walls would be one of the first things I mention to a lender so its cleared before the appraisal is even ordered. In addition, if the lender doesnt recognize that the interior walls have no value, you're at the wrong bank.

I find it hard to believe that I'm still working around this bleeping property. The buyr's bank wants 4 leases since the appraiser said there are 4 units. There aren't, there are 3 but one of those three is actually 2 put together.. and the last one is a taw on a very scarey 2nd floor. I might get $5.00 a sq. ft for that. I have a lease ready to be signed for one of the units...@ $9.00 a sq. ft. The owners bank will not givehime a mortage untill all leases are executed. So, needless to say ths building has not closed. And the saga goes on an on...I'm just disgusted. The septic had to be replaced, so a new tenant would be able to get permits to run their business. The owner and seller are splitting that. The seller wants to rewrite the lease because if the buyer backs out he doesn't want to be a property manager... you know these people are just plain stupid. They were tellling me how to rewrite the lease and I finally told him to have his lawyer rewrite it. I'm not in the lease writing business. The only way I figured to close it was to write it with the owner and have it transfer at the closing to the buyer. That's the only way I saw to get a decent lease to the buyer's bank... There of course is the 100K deposit money that the buyer has given at PS, which the seller's lawyer is trying to keep because it hasn't closed yet. Of course if the buyer can't get the mortgage $ then it's not going to close...Unbelievable. And of course I'm the scape goat. Sorry, I just need to vent!!
Ferne.

If all else fails have the buyer contact me. I can garuntee to get it done. I dont need lease agreements and can use market not actual rent to qualify. I will need my own appraisal but I can close in 30 days provided I get all paperwork in a timely manner. Best part is, you get to be the hero.

I'm available by cell phone 24/7 619-246-0731

Finally getting the lease signed tomorrow..I hope. I've had a problem with the figures but that's another message somewhere. Now the buyer should fax this executed lease to his bank and maybe they will accept it. Buyer can't go to another bank, already paid $2,500 for the appraisal and it will look bad on his credit report.

so you would let the deal die rather than get another appraisal? Mortgage inquiries do not effect credit score unless you have over 10 in six weeks.