Financing a unique property can be an exciting journey—but it’s rarely straightforward. When a client came to me with their heart set on a property that didn’t fit the conventional mold, I knew it would require creative financing, persistence, and advocacy to bring it across the finish line. Here’s a behind-the-scenes look at how we navigated a complex situation and made the impossible possible for our client.
The Property and Client Goals
The property was unique, to say the least. Previously used as an Airbnb, it had been outfitted with an additional dwelling unit (ADU) in a converted two-car garage. The ADU included a full kitchen, three bedrooms, a living area and bathroom, making it essentially a second home on the same lot. This setup was ideal for my client, who was purchasing it with his nephew.
The goal? To secure financing with no more than 20% down. The nephew planned to use the main home as a secondary residence, while my client would rent out the ADU as a long-term rental. While the property met their needs perfectly, it presented unique challenges in the lending world.
The Initial Financing Hurdles
One major hurdle became clear early on: many lenders were unwilling to count the ADU in the property’s appraised value due to its unconventional setup. Out of 12 B lenders and 3 Mortgage Investment Corporations (MICs) I approached, most declined to finance the property, and the few that were open to it offered only 50-65% loan-to-value (LTV). This meant my clients would have to put down far more than the 20% they had budgeted.
After exhausting nearly every avenue, I finally found a B lender who seemed open to considering the deal after a detailed discussion with their business development manager (BDM). This was a turning point, and I went to great lengths to disclose every aspect of the property’s use and my clients’ intentions.
Setting Up the Financing
To set the stage for approval, we structured the deal as follows:
- My client and his nephew would jointly purchase the property.
- The nephew would use the main residence as a secondary home.
- My client, who is self-employed, would utilize the ADU as a long-term rental.
- To qualify, we opted for a stated-income, non-verified product to assess my client’s self-employment income.
We were down to the final three conditions—so close to securing the financing. But then, an unexpected issue emerged.
A Last-Minute Setback
An appraisal conducted before the property was listed resurfaced and my clients wanted to use the preexisting appraisal report. Since the property was an active Airbnb at the time of the appraisal, it noted the current use, creating a major issue. The lender interpreted this as an indication that the property would remain an Airbnb, especially given that the purchase contract included furniture. Concerned that the clients were planning to operate a business, the lender immediately pulled their financing offer, believing I hadn’t been fully transparent about the intended use.
The Search for Solutions
At this point, with conditions removed, we were in a challenging position. My clients, understandably, were feeling frustrated, and I was determined to find a solution. I explored various alternatives:
- New appraisal? Rejected.
- Higher down payment? Still rejected.
- Adding an additional borrower? No luck.
It became clear that the lender’s decision hinged on the perceived lack of transparency about the Airbnb use. My broker advised me to dig through every correspondence I’d had with the BDM to confirm that I had been explicit about the property’s details and intended use. Finally, I found it—the very first email where I had fully disclosed the property’s Airbnb history, the ADU setup, and the clients’ intentions.
I sent the email with a time-stamped record to all parties involved, hoping this evidence would change their stance.
Advocacy and Resolution
After submitting my documentation and advocating for my clients, I received a discouraging response: the investor was standing by their decision to cancel the financing. Frustrated but undeterred, I reached out directly to the BDM. I highlighted the disclosure in my initial email and requested that they escalate the matter for further consideration. I emphasized that I had followed every protocol and provided every detail upfront, urging them to take one last look.
An anxious couple of hours later, just before the end of the business day, I got the call. The lender had reversed their decision—they were back on board to fund the deal!
A Successful Closing
With the financing re-approved, we had just two weeks to scramble and meet the closing deadline. Thanks to quick action and support from everyone involved, we were able to close the deal on time. My clients were thrilled—not only with the outcome but with the level of dedication I showed throughout the process. They expressed their appreciation for the effort it took to overcome such obstacles, which was incredibly rewarding to hear.
Lessons Learned and Takeaways for Realtors
This scenario underscores the importance of several factors when dealing with unique properties:
- Thorough Communication: Disclosing every detail upfront is critical, especially when working with properties that have unconventional uses or features. This transparency builds trust and helps lenders make informed decisions.
- Documentation is Key: Keeping a record of all communications with lenders and stakeholders can be invaluable in situations where there’s a dispute or misunderstanding.
- Persistence Pays: When challenges arise, having a team that’s willing to go above and beyond can make all the difference. This experience highlighted the power of persistence and strong lender relationships in overcoming obstacles.
How We Can Help with Unique Financing Needs
Financing unique properties often requires creative structuring, detailed knowledge of lender criteria, and an unyielding commitment to the client’s goals. If you have clients interested in unconventional properties, I’m here to guide them through the complexities and find solutions—even when it seems like every option has been exhausted.
Final Thoughts
Navigating the mortgage landscape for unique properties can be challenging, but as this story shows, it’s not impossible. I’m here to support both you and your clients in securing the financing they need, no matter the hurdles.
If you’re working with clients who have unique property needs, let’s connect! I’d love to discuss how we can work together to make their real estate dreams a reality.
