A case study in a blanket refinance that died on a DSCR miss the file cabinet could have caught
A useful cautionary case on blanket refinances: an owner of five single family rentals, four owned free and clear and one with a small note, combined value around $1.09 million, seeks one blanket loan to consolidate and pull out roughly $520,000. Say the broker charges a $2,500 due diligence retainer, described as credited against origination at close, plus one point at close, and states the retainer has never failed to be credited in years of doing this. Five appraisals are ordered at $650 each, $3,250 total. Two weeks later, the lender's sizing comes back with the portfolio debt service coverage ratio at 1.14 against a 1.20 minimum, because two of the five properties were reassessed the prior fall and the tax figures the lender used ran well above what was in the borrower's own spreadsheet, which had used the prior year's bills. That gap in expenses, even though modest in dollar terms, is enough to move the ratio below the cutoff. The remaining options at that point, taking a smaller loan amount or dropping the two weakest properties into a three-property loan, often aren't worth pursuing given the fee load already sunk, and the retainer typically is not refunded once the file dies for this reason. The frustrating part is that this kind of miss is usually findable in advance: current tax reassessment notices are often already sitting in the owner's own files, but many brokers only ask for a rent roll and a schedule of real estate, not current tax bills. The lesson: get the lender's actual sizing formula in writing before ordering appraisals, including which tax figure they use and what vacancy and management assumptions they impose regardless of self-management, then run the numbers against that formula with current tax bills before committing any nonrefundable fee, or negotiate the retainer to be refundable if the lender's own sizing kills the file.
