Retrofit, coming soon

Today i met with a client and he shared something with me. With Chase’s rates on a quick rise to the neighborhood of 4.29% for multi-family lending, he wanted to explore his options with other lenders and settled with East West Bank. As luck would have it, East West Bank is now requiring a hold back of funds for retrofitting. This does not only refer to the city of Los Angeles mandate, where soft story retrofitting is already required and owners have 7 years to remedy, this was a multi family unit in San Gabriel with tuck under parking. Again, this was a lender requirement and not one put forth by the city. The 3 conditions that the lender had required before closing were as followed.

1)get an engineer out to estimate costs 2) bank will hold back 1.25x the cost of fixing it and it will not be released until fixed 3)6-9 months after close have the retrofit work completed.

If the loan was $1m and the estimated costs for retrofitting is $100k, then they would only give you $875k and hold the $125k, not to be released until work is complete. Will other banks begin to follow suit? Likely.

With such a significant hold back, we may start to see buyer’s purchasing power go down.

 

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