Deals are dying that didn’t die before – but why? The short answer: SWARMP.

SWARMP has always existed, but it’s recently become a bigger issue in New York City following the Surfside, Miami condominium collapse in 2021. A contributing factor under investigation for the Surfside collapse is the lack of maintenance done in the building to maintain its integrity. 

As a result, New York City, and mortgage lenders alike are cracking down to ensure buildings are safe, and that banks are not handing out loans in buildings classified as SWARMP or unsafe. The safety of buildings has always been important – and of course, banks will only finance units in safe buildings.

Since the Surfside condo collapse, banks are being much more careful about what they constitute as a “safe” building.” That’s where SWARMP comes in – due to this new scrutiny of building status, deals are dying that would not have before. 

Here’s everything you need to know to help keep your deals alive:  

So, What Is SWARMP?

In New York City, buildings greater than six stories tall are subject to the Facade Inspection and Safety Program (FISP). During the cyclical inspection, a building’s facade must be classified as one of the following options: safe, safe with repair and maintenance program (SWARMP), or unsafe. 

If a qualified exterior wall inspector (QEWI) recommends a SWARMP condition, that condition must be repaired within one year.

If the SWARMP condition is not repaired in time, the condition must then be classified as unsafe.

Why Should You Still Consider Purchasing in a SWARMP Building? 

In September 2023, Frannie and Freddie announced new regulations and restrictions about lending to buildings with SWARMP or unsafe status, which is now making some deals trickier – but not impossible. 

It’s important to note that SWARMP stands for SAFE with a repair and maintenance program. So, an inspector has already said the building is safe. 

As long as plans are in place and repairs are being made by the building within the required year, SWARMP status should not deter you from wanting to purchase your dream property – it might just make it a little harder, but that’s where we come in. Of course, you should discuss the specific building and the plans that they have in place with your attorney and your real estate agent. 

What Can You Do to Successfully Navigate a SWARMP Deal? 

If you’ve found your dream property in a SWARMP building, it’s still possible to make a deal happen. You can successfully navigate a SWARMP deal with the perfect combination of having the right lender, the right buyer’s agent, and the possibility of financing alternatives, like cash. 

If you’re financing the deal, your agent will need to work closely with you and your lender to ensure the deal closes – and sometimes it takes getting creative to figure out a financing solution that works for all parties. 

David Rodriguez, a Loan Consultant at Loan Depot, has come up with creative solutions like portfolio loans and private label products vs. traditional loans to circumvent the restrictions Fannie Mae and Freddie Mac have put in place. While a portfolio loan does come at a higher rate, together, your agent and lender team can help negotiate seller concessions like seller-paid maintenance to offset higher rates. 

“’Through negotiating other pieces of the transaction, whether it’s closing cost help or maintenance for twelve months, we’re seeing these deals will get done,” says Rodriguez. “However, I do not foresee a large depository of lenders doing this type of work. It’s going to be your independent mortgage bankers like myself – people who have access to create these types of products with their own capital markets.”

Knowledgeable buyer’s agents who leverage lender partnerships are crucial for navigating a SWARMP deal.

“Imagine if you do not have a buyer’s agent. Now you’re going in blind, you’re not going to find out about this [SWARMP] information, because a large lender isn’t going to tell you until week three under contract that the building has been declined and they can’t lend to you,” says Rodriguez. “Respectfully, anyone that thinks that they can go off and buy a co-op or condo on their own in New York City is crazy.”

At Platinum, we’re no stranger to SWARMP. 

“It is vital for agents and parties involved in real estate transactions to be proactive and informed about a building’s SWARMP status and its potential impact,” says veteran Platinum Properties agent, Jesse Klein.

Jesse has become a pro at navigating SWARMP deals and has done the work and research to ensure the smoothest transaction possible for both parties. The key to his success? Do your research. Jesse goes the extra mile to check the Department of Buildings website for facade inspection status even before touring properties with his clients. For SWARMP buildings, he’ll review the Facade Inspection Safety Program (FISP) report for repair details and timelines, and is always prepared for potential financing issues with agency-backed loans on SWARMP buildings.

“Be transparent with your clients about potential SWARMP-related financing hurdles,” says Klein. “SWARMP deals aren’t impossible to do, they’re definitely more complicated, but the right agent can help make those challenges a success.”

If financing can be avoided, a cash offer circumvents the need for financing restrictions and allows the seller(s) and buyer(s) to go through with the transaction much more smoothly than if agency-backed lending restrictions were at play. 

Regardless of your financing method, a knowledgeable agent and team of professionals is key to keeping you up-to-date on the state of the market, the building and the complexities of the deal. 

Whether you have additional questions about SWARMP, or if you’d like to kick off your real estate journey, reach out to Platinum Properties today to be connected with a member of our team.