Hi Karen,
I can relate to your post. I've been in the mortgage field for many years and have experienced similar frustration. Considering that FHA financing is the way to go these days especially if working first time buyers, it's amazing how difficult FHA makes it when it comes to appraisals and repairs. Here is a solution for you in the future. I noticed that you mentioned 203k program. Well, FHA also offers something called a repair escrow. I'm sure you have ran into this in the past. Basically a repair escrow is a very tiny 203k. It works well for properties that need just a little bit of work/upgrade. Most lenders will limit repair escrow to $3,500. It works exactly the same way as a 203k, just much simpler. Repair escrow is very popular with HUD homes but you rarely see it with conventional foreclosures or non-distress sales. I think it's because the mortgage person usually doesn't want to work too hard on the loan. The key here is to make sure that the lender permits a repair escrow. Some lenders don't do them just like some lenders don't offer 203k. Typically it is easier to work with a broker on a transaction like this because they will have access to numerous lenders instead of being limited to one set of programs. I hope this will help you in the future.
Thanks,
Igor
Via
Karen Fiddler Broker/Realtor (The Fiddler Realty Team/eVantage Real Estate):
Over the past few days, I've been working with a buyer who would like to use FHA financing. Problem is that the home is not going to qualify for traditional FHA due to repairs which need to be made.
To the consumer, the needed repairs seem like very minor things, and could easily be handled by a handiman which the buyer is willing to hire, prior to the close. So the question from my buyer was:
"Why can't we just go in and fix the problems? It's been on the market for so long, they should want to sell the home"
The short answer is "yes, they do want to sell the house, but no....they are not going to allow us into the home to make repairs."
Why? liability and risk. It might seem counter-intuitive to not allow "repairs" to be made, but banks don't. The risk is too great that something can go wrong and now they have an asset in worse shape than when they started. Additionally....what happens if the handiman falls off his ladder? Liability! Bank Liability! They simply don't need to allow this. They can wait for a cash buyer if necessary.
There is no complicated answer...but the long and short is that banks are not going to allow repairs prior to the close. When this happens, the 203K FHA is the best way to proceed. It functions like a FHA loan, but allows the buyer to finance repairs and upgrades after the close with funds held in escrow for this purpose.
Karen Fiddler
Broker/Associate
The Fiddler Realty Team/eVantage Real Estate
Lic # 01494165
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