The rent schedule came in 17% light and the deal closed anyway

The deal

A four bedroom, four bath cabin on the ridge above Gatlinburg at $689,000. Second property for the buyer, twenty percent down at 7.375%, thirty year term. The model the file was built on credited $6,150 a month, taken from the listing agent's revenue sheet. Against a PITIA of $4,507 that is a DSCR of 1.36. Nobody in the deal was worried.

The problem

The appraiser's short-term rent schedule came back at $5,100 a month. Seventeen percent under the number the file assumed.

This was not a valuation problem. The value came in at contract price. It was an income problem, and income is the whole loan on a DSCR product. Run the same structure with the appraiser's figure: $5,100 divided by $4,507 is 1.13, against a product floor of 1.20. The file was dead as submitted.

This is the most common surprise in short-term rental financing and it is not the appraiser being pessimistic. A listing agent quotes gross bookings, sometimes for the property's best year. An appraiser works from a rent schedule and comparable rented properties, and the lender then credits some version of that. The two numbers measure different things. Only one of them funds a loan.

What we did

Three levers move DSCR: the income the lender credits, the loan amount, and the rate. The income was now fixed, so we worked the other two and priced both before saying anything to the buyer.

• Repriced at 75% LTV instead of 80. The loan drops from $551,200 to $516,750 and the rate improves an eighth to 7.25%, which takes PITIA to $4,225.
• Recalculated: $5,100 against $4,225 is 1.21. Over the floor by a hundredth.
• Confirmed the buyer actually had the cash before proposing it. Down payment goes from $137,800 to $172,250, so $34,450 more at the table on top of closing costs.
• Left the rate where it was. A buy-down also cleared the floor, but at this loan size the points would not have paid themselves back for about four years, and the buyer's reserves were the thinner resource.

How it closed

Forty-one days from application, including the week spent restructuring after the appraisal. Same lender, same product, one repricing, no second appraisal.

The version of this deal that does not close is the one where the buyer has exactly the twenty percent and nothing behind it. That is why the question now gets asked at intake rather than after the appraisal: what does this file look like at five points more down, and is that money available. If there is no answer, we say so while there is still time to negotiate the contract price instead of scrambling to save the structure.