Time is ticking away and we are trying to get a handle on what has to be put together, and when. Not an easy process if you are a first-time buyer. We finally (sort of) got a schedule from ShoreBank:
- Determine project budget
- Commission appraisal of property
- Take loan application to ShoreBank’s loan board for approval
Project budget
I scramble to put a budget for our green rehab together. We need to determine how much money is going into the green rehab to set the total loan amount (purchase price + rehab budget).
Fortunately we have our project rationales and principles in place to guide us through this process. We shared this information with developers, green building experts and friends that had rehabbing experience and could help us with our project budget development. We also contacted various specialists (such as energy experts), vendors (such as solar hot water), and contractors for pricing information.
Appraisal
Once we have the budget number, there is no guarantee that ShoreBank will lend us that much. The upper limit of the loan amount is determined by two factors. The first one – how much we feel we can take on – is controlled by us. The second is determined by an appraisal commissioned by ShoreBank. This appraisal takes into account all of our planned improvements to the house – it is a post-improvement appraisal.
Our worry is that the dollar amount of the post-improvement appraisal will be lower than our project budget. That would through a big old wrench into the process. We would need to conduct more pricing research to figure out how to cut our budget with the closing date fast approaching.
To get to the appraisal commissioned, ShoreBank was pressing for our project budget and I was able to deliver half a day early. That did not help us. It turned out that the appraisal would take longer than usual due to the sustainable scope of our rehab plans and the associated extra research.
Loan approval
ShoreBank’s loan board in Chicago currently meets once a week (every Thursday) to review and approve loan applications. Phil (our banker) worked hard on getting our application in front of the board as soon as possible. He needed the appraisal on Wednesday for the Thursday’s meeting. But unfortunately the appraisal arrived on Thursday and we missed this week’s opportunity to have our application reviewed.
The bad news is that this set us back a whole week to next Thursday. That is the same Thursday on which our closing should have taken place! The good news is that the appraisal was actually higher than our requested loan amount.
We now have to worry about pushing the closing date back again. We were not sure if the seller would just cancel the deal or go along with another extension. This is where we could rely as usual on Joe Ziccardi (our attorney). He managed once again to have the seller agree to the new closing date and to have any penalties for the delay waived. Thank you Joe!
We coordinated with ShoreBank to make sure that the new closing date was realistic: The seller had insisted that this was the last and final extension granted.