Cohousing-L Mailing List: Re: "arm's length"

[Catya Belfer-Shevett (catya]

Thanks Janet.

Yes, that second problem is quite a challenge.  Fortunately, we have a 
couple of cash buyers who were able to close first.

The first one sounds similar but not entirely the same to what we're 
experiencing..  This is where a bank doesn't think it's a standard arm's 
length transaction because the person buying the home is a member of the 
llc that is selling the home.

Tricky!

        - cat

On 1/30/2009 10:46 AM, Janet Kelly wrote:
> Hi Catya,
>
> I'm assuming this is coming up when members apply for bank loans to buy
> their units.  We ran into several sticky problems at that point.  The first
> was that our project is legally structured as a condominium, and banks don't
> generally give conventional fixed rate mortgages to the first buyers in a
> new condominium, since they can't resell them on the secondary market.  And
> many members were concerned about getting an adjustable rate mortgage, even
> though they can usually be converted easily after the requisite number of
> units has closed.  We made an arrangement with the bank holding our
> construction loan so that the bank created an internal fund to offer
> conventional fixed rate mortgages to the early buyers.  I don't know whether
> banks would be willing to do this in the current financial market.
>
> The second problem was with appraisers, who were completely flumoxed (sp. ?)
> by the cohousing concept. Also, at least in Wisconsin appraisers get paid a
> fixed rate by the lending bank for each appraisal, so they balk at spending
> extra time on anything that looks unusual to them.   Here again, the first
> unit sold is the hardest.  My suggestion is to talk with them in detail and
> offer info about how your units were priced, document costs of construction,
> point them to other cohousing in your state.  In our case appraisers also
> looked at sales of local condos in projects that had some common space
> (although it was nothing like cohousing).  Once you have convinced one
> appraiser, you can use his or her name in talking to the next set of
> appraisers.
>
> I hope this helps some.  Please feel free to call me if you would like to
> talk.
>
> Janet Kelly
> Arboretum Cohousing -- Madison Wisconsin
> 608-255-7277
> janetkelly28 [at] gmail.com
>
>
>
> On Fri, Jan 30, 2009 at 9:24 AM, Catya Belfer-Shevett <catya [at] 
> homeport.org>wrote:
>
> > Hi folks,
> >
> > This is probably mostly for groups that self-developed...
> >
> > Did any of you run into problems with the banks not considering the
> > purchase of the units by a member being an "arm's length transaction"?
> > If so, how did you deal with that?
> >
> > Thanks,
> >
> >        - catya
> >
> > --
> > Catya Belfer-Shevett   ~   webmaster, www.cohousing.org
> > www.catya.org   ~   Cohousing in MA! www.mosaic-commons.org
> > _________________________________________________________________
> > Cohousing-L mailing list -- Unsubscribe, archives and other info at:
> > http://www.cohousing.org/cohousing-L/


--
Catya Belfer-Shevett   ~   webmaster, www.cohousing.org
www.catya.org   ~   Cohousing in MA! www.mosaic-commons.org