How to research a mortgage lender and real estate developer

September 13, 2012 9:18 AM

How do I research a real estate developer and a mortgage lender (in Brooklyn) to make sure they're trustworthy? (more detail below)

My spouse and I are getting ready to buy a house in Brooklyn. We're talking to a company who buy houses, gut-renovate them, then resell (would you call that a real estate developer? Or what?).

They have a gutted property that we really like, so we're discussing doing renovations according to our requests, then buying the property in move-in condition.

We had been talking to a Big National Bank about a mortgage, but the company wants to have the mortgage done through a small local lender who they've worked with before, for the sake of efficiency and speed (and, I suspect, so they won't have to get the full range of building permits).

The housing company is understandably wanting to be sure that if they're doing renovations to our specifications, we're actually going to buy it. So we're going to be putting down quite a bit of money after we sign a contract, but before the renovations are done. Which means that we'd like some reassurance that they're not about to disappear with out money!

The Better Business Bureau had a little info about the housing company, but not much. We haven't found anything about the lender other than the fact that they were formed six years ago.

Does anyone have advice on how we can research these companies to make sure they're not going to scam us? They've done nothing to make us not trust them, but the sums are big enough that we're automatically a little paranoid.

P.S.: I'm more than happy to provide the names of the relevant companies by meMail, in case anyone has personal experience with them

posted by ThatFuzzyBastard to home & garden (7 answers total)

A thing that one typically does with houses that are being constructed is that there's an escrow of money and the builder takes draws on it as certain benchmarks are met.

You don't pay them all of everything all at once.

Here's a sample of one. Here's another explanation.

You should have them pull all permits, and I'd go so far as to engage an inspector to review everything so far, and everything at each step of the process, to insure that it's all being done right.

You're the ones with the money, you're the ones that have to live in the house, you should call the shots.

New York has some crazy-ass real estate laws, I'd get a real estate lawyer to help with all of this.

I'm assuming that we're talking in the neighborhood of about a million dollars here, isn't it worth about $5,000 to insure that everything is done right?
posted by Ruthless Bunny at 9:30 AM on September 13, 2012 [1 favorite]

Yeah, I think the same lender that's providing us with the mortgage will be providing the builder with the construction loan, so the deposit will basically be the escrow.

Regarding permits: NY being the crazy place it is, permits often get set aside because they're just so onerous. Our real-estate lawyer admitted that he wasn't getting permits for interior work on his own house, because it's such a pain. Which is why we're not super-concerned about the lack of them here. This is just a two-story house, so doing it permitless is pretty standard.

But we do want to be sure we can at least trust these folks! So any advice on research is appreciated.
posted by ThatFuzzyBastard at 10:41 AM on September 13, 2012

Agree with Ruthless Bunny: FIRST thing to do is get a real estate lawyer.

Another thing is: if the full range of permits is not gotten, you may have difficulty when it's time to get the C of O.

So make sure everything is done in a perfectly kosher manner.
posted by DMelanogaster at 10:43 AM on September 13, 2012 [1 favorite]

NY being the crazy place it is, permits often get set aside because they're just so onerous.

Yyyyyes and no. If you are doing a renovation in Brooklyn, and there are no permits in the window, you are asking for a world of ass-pain, basically. You can get permitted. If you are buying something that's gutted, and your plans are not like "extend the building 20 feet in the yard and also a variance for height please" it's not actually that onerous. Everyone who works in Brooklyn files permits constantly.

You can and should ask them for addresses of where they've worked. THEN, you can check city records (online! Don't be alarmed!) for the permitting, for violations, for stop work orders, and everything related to that parcel. Also the mortgages--the actual mortgage documents are put online, so you can look that up by lot and parcel number too.
posted by RJ Reynolds at 11:23 AM on September 13, 2012 [1 favorite]

The City Records RJ Reynolds is talking about are located here: http://www.nyc.gov/html/dof/html/jump/acris.shtml. You can do a Parcel Lookup to find the BBL for any address.

Brooklyn real estate is ridiculous and there are a lot of dirty hands. If your real estate attorney came recommended by anyone already involved in the transaction, you might want to consult with someone independent. The Brooklyn Bar Association runs a Legal Referral Service with panels of experienced attorneys- there's a $25 fee for a half hour consultation. https://www.brooklynbar.org/lrs/real-estate/

The NYS Unified Court System is also a handy place to look up anyone involved, including foreclosures the small lender might be involved in (though that doesn't necessarily indicate much, except that someone defaulted on a loan): http://iapps.courts.state.ny.us/webcivil/ecourtsMain.

Doing work without a permit sounds like cutting corners, and it's your money and your credit that will be on the line.
posted by jenad at 5:54 PM on September 13, 2012

Also, the Department of Buildings website: http://www.nyc.gov/html/dob/html/bis/bis.shtml
posted by jenad at 6:01 PM on September 13, 2012

We do have a real estate lawyer, recommended by a friend who bought recently, so I feel pretty good about him. Thanks for those links, though---that could be really helpful!
posted by ThatFuzzyBastard at 7:02 AM on September 14, 2012