underwriter reqest
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underwriter reqest
I am in the process of selling a rental home in Florida that is presently occupied with a tenant. We have a buyer, but the buyer’s bank underwriter is requesting a rental agreement from us. Is this normal and do we have to give out this info.
Asked on October 2, 2019 under Real Estate Law, Florida
Answers:
SJZ, Member, New York Bar / FreeAdvice Contributing Attorney
Answered 5 years ago | Contributor
There is no "normal" in a sense: since there is no obligation on the part of lenders to lend--they decide who to lend to, when, and under what criteria--the bank and its underwriter are free to request anything they want. If you don't comply, they don't have to lend to you; you are free to try to find another bank/lender. So if you want this bank to consider lending to you, you have to provide them what they want.
On another level, it is logical and reasonable, and so "normal": the rental income from the tenant is part of what you will have available to pay the loan and taxes and maintain the property. A written rental agreement lets them assess the stability of that revenue stream: e.g. is it a lease for a year or more, meaning the revenue is stable for at least that long? Or if there is no written agreement, or it is a written month-to-month agreement, the revenue can be cut off on a month's notice. The agreement will also indicate who pays certain expenses, like utilities; whether the renter needs to maintain insurance to protect not just him/herself but also the property; who is liable to what repairs or maintenance; etc. A written lease or rental agreement is part of evaluating the viability of lending to you, since it goes to the finances or economics of this rental property.
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