This may seem like a silly question for seasoned investment property owners, but I have first hand experience in trying to refinance while a property was on the market. Silly me, I had thought the unit was de-listed but did not follow up to make sure before diving into a refinance. Everything was going smooth until my realtor called saying an appraiser had called inquiring about the listing. She explained that the property was off the market but the appraiser was skeptical and backed out of the process. Not only that, he informed the mortgage broker that the property was being listed for sale. I jumped in the middle of the confusion (proactive), had the realtor send an official letter explaining the non-listed status and called the broker to confirm that the property was not on the market.
So what’s the big deal having it listed while trying to refinance or restructure a loan? The broker put it like this, “why would we risk financing a property when it could sell during the closing process? You could potentially walk away with the profits from the sale as well as the cash out on the refinance.” Seemed a bit far fetched to me, I believe it had more to do with the potential loss of any interest profit if a sale was made shortly after the refinance; it just would not be profitable for the lending institution. Definitely a lesson learned.
Here is another nugget of information, Once the alarm bells go off in the underwriters office (which they did in this case) they start digging hard for any other anomalies. They started requiring proof that all units are currently occupied, listing history over the last three years, a more detailed account of credit inquiries and other data. Bottom line, this goof just about sunk the refinance attempt. I saved the day by reacting quickly but the refinance eventually stalled due to No Comps.