Anybody Else Having Issues With Your Customers Financing Being Capped Unexpectedly?

wackman

I've had three jobs in a row have to back out because their banks have capped their lines of credit or changed lending criteria before closing of an otherwise done refi.

This has put a serious cramp in my schedule with most of my summer and fall work suddenly gone. Had to refund deposits and all. I even tried sending them to some of my preferred lenders but everyones scared of declining values (even though we don't have that here yet) and cutting way back. My friend even had this happen and has to completely change how he was going to pay for his wedding (I told him it's a blessing in disguise to not blow all that money). They took him from 100k down to 15k.

This could be real tough for us resi guys if new homes aren't selling AND bigger, equity driven, remods aren't being funded as easily.

Maybe I should switch to some commercial for now....

Anyone else experiencing this?

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"I only bother remembering things that I can't easily look up." Albert Einstein

MGSProperties

Yes, we are all feeling this. I have also lost some jobs due to financing problems. One of my custom homes job got cut off in the middle since the bank did not want to renew the construction loan. The customer basically gave them a quick claim deed and told them to F them selves, they are now stuck with a piece of land with some rough plumbing & concrete footings and they are almost 2 mill in the hole.

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davinci

we are in the midst of a credit crunch. banks are under water and under capitalized due to bad loans and investments in housing. this is going to cause plenty of problems in the economy and the federal reserve has been talking about it. banks are afraid to lend even to those with very good credit.in response,banks are lowering lines of credits and even cancelling them on people. its very difficult out there.

rbsremodeling

Lost 500k+ in work from Dec-march of this year due to revise credit terms and construction loans being nixed r owners backing out of deals. Talk about a kick in the butt.

I thought about leaping off a building but figure with my luck I would just be paralyzed and broke

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mdshunk

Why are you giving deposits back? You need to stop doing that.

Ed the Roofer

My question exactly.....

Unless the contract was contingent upon them getting financing approved in a set period of time.

You can also finance the project yourself with a monthly payment schedule.

Double the contract price and divide that by 60 months with an acceleration clause added in, plus a few other good ones for your protection and include the time to pre-Lien the Home upon completion of the project.

Ed

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wellbuilthome

Ive been scrounging for work since june 5th , HO blew me off ,100,000 + job down the tubes . I found some small jobs to keep me going untill last week when i had a real job 150,000+ ready to start and blam building department closed for some vay Kay wont be back untill Aug 21. I wish i was on the boat for the summer , but its in my drive way getting some work done on it . I have 5 different people out looking for money NOW 450,000 + I hope they find some. I have a few months of work lined up but I wish some of my leads would come back in job forum. I dont even feel like looking at any work . It seems like a wast of fuel. Ive been getting 2 or 3 good leads a week every one likes my plan & price. When i call them they tell me they have no money. Or they want to wait till spring. Well i get my new to me skid steer tomorrrow. I hope i find some work for it .I wanted a new one . I told the sales guy i will have to buy in the spring . Well no more negativity from me .

mark the coach

Hello guys

Your not alone. Several contractor friends have lost numerous jobs due to lower real estate values. One just lost a $175,000 deal due to the bank decreasing the credit line by $100,000.00. Plans drawings and scope all done. As far as giving the deposit back, that's your call. But usually the home owner knows there is a problem with the bank early on and they don't tell you. Maybe you can parlay the deposit into a smaller job for the owner so at least you are doing something and they still receive value.
One thing you can do, so you don't waste a bunch of time with home owners who don't have enough funds set aside for the project, is ask them to verify available funds upfront before you run around like a chicken with your head cut off trying to pull it all together. Just make this a condition to signing a prelimanary design order. You can use a concept called upfront contracting to obtain an agreement from them.

mark the coach
the contractor coaching partnership

davinci

yeah,wasting fuel by going on leads where the potential customer does'nt have adequate funding is extremely frustrating. i try to pre screen on the phone but at the same time try not to sound to pushy. i do siding and windows so its a bit different than you guys that do 100k plus jobs.

davinci

onr final note. i was an equities(stock) trader so i am very informed about the current economic conditions. trust me,they are VERY bad. the consumer is 2/3 of the economy and when the consumer is up to his ears in debt and no one will give him/her a loan or a credit card to transfer debtmthe economy is in trouble. this was a ,ong time coming and a major wake up call. consumers can't just rack up astronomical amounts of debt and then just get another loan to pay the old debt off; stealing from peter to pay paul. its like a ponzi scheme.

RenaissanceR

So far this year, I've had cancellations on projects totaling $225,000. A majority of the cancellations are due to the fact the clients were using the equity in their homes to finance the projects. Well, property values dropped drastically, so the banks reduced the home equity lines of credit. The ongoing
issue of "So and So can do the work for ***x" also has impacted things.

People's #1 priority is "cheap, cheap!", and forget permits or licensing, they
are looking for the cheap and fast route.

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davinci

problem is that most homeowners use lines of cred/ho,e equities for big projects. where else they going to come up with 100k...

kauser667

Commercial still effected to! Payments are coming slower and slower!

Some of my wholesellers have cut terms for the worst! Oh yea by the way my line of credit was lowered without notice.

Try to run a company with little to no reserve! Its a snowball effect

wackman

They were good sized deposits and it's not their fault the heloc was capped. It's not like the finances weren't there at the time of signing, they were, they just got yanked away unexpectedly. I understand what happened and they didn't do anything wrong, seems to me the only decent thing to do is return their money.

That's a good idea but I don't really have the funds to finance anyone right now. I've got houses sitting with a total interest cost of almost 12k a month burning me up right now.

You're not making me feel better, but good to hear.

Exactly...

__________________
"I only bother remembering things that I can't easily look up." Albert Einstein

rescraft

Last week, down here in San Diego, a developer had a 20 yr business relationship with a bank and had done over a BILLION $$ over that span and they cut him off.

Chris Johnson

I started a project for owner/builder in the spring, right when I got the second check the bank (wells fargo) rolled back their line since property values have dropped so much. Fortunately for me they had bonds and cashed them to keep the project rolling. I'm done and still waiting on the last 8% and the projects shut down.

Will I see my 8%? according to my lien ~~~ yes I will

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Chris

SelfContract

No surprise. With this bad economy, everyone and every industry has its own source of MONEY supply problems:

1. Banks have no/less more money$ to lend (bad loans, bad investments, forclosures, bad debts, etc.)

2. HOs have no/less money$ to spend (house market decline, equity decline, less savings, more gas$ and food$ spending, job losses, bankruptcy, etc.)

3. Contractors have no/less money$ to stay/compete for business$ (contracts canceled/delayed, bids retracted, HOs withdrawal, SUBs running, competition with illegals/storm-chasers/DIYs, supply prices increased, Gas$ spending high, higher insurance rates, etc.)

4. Supplier/Retailer/Big Box have no/less demands for orders, over supply, high transportation costs, laid-off, store closings, etc.

5. States have no/less budget (house taxes NOT increasing enuff to collect more, etc.)


Conclusion : Money$, Money$, Money$, Money$...etc... is the source of all modern society problems. I hate money$ but can't live without it!