As a loan originator, I am constantly telling buyers and real estate agents that there is more to an FHA transaction than a conventional transaction and the lenders will look at the details of the file much closer.
What does this mean exactly? Well the application is longer and has a separate set of disclosures required by HUD. There seem to be twice as many conditions to get closing docs out and there could be a lot of surprises, especially when it comes to property conditions.
To offer an example, my team just experienced first-hand how the interpretation of the condition of the property can make for a hectic transaction. First of all, there was a pest report done on the home that had a few issues, none of which were section one items that would (normally) be required to be fixed prior to the close of escrow. There was however, a railing that needed to be built on the deck and some grout that needed replacing- which were issues noted by the appraiser.
Now, we expected to have the new railing reinspected and approved by the appraiser... which we did.... great!
As we cruised along to closing, unexpectedly the underwriter became very concerned about that grout..... so here came several new conditions...that grout had to be replaced and the deck had to be re inspected from underneath with regards to termite infestation... work had to be cleared by a professional contractor (or the termite company)...in workmanlike manner... yes, those were the exact words...
I have also seen recently appraisers and/or underwriters wanting water damage inspected, additional grout issues, debris removal, rubber caulking replaced, and cover plates installed. The challenge of these issues is they are at the discrepancy of the underwriter and/or appraiser. My Account Executive even told me other underwriters would not have conditioned for these minor repairs. There is no black and white answer as to what will be in question.
Our best advice is what I advised my clients to do in the beginning and submit an addendum stating the buyer waive their right to a pest inspection especially considering there was nothing wrong with the property outside of what we would consider minor issues. I suggested this to the real estate agent and she was sure with her 20 years' experience there was nothing on the inspection. Note to self: go with your gut! The right (or wrong?) underwriter might think the home will crumble the day after we close escrow!
It's more important than ever to have a competent lending team on your side FHA or not. If you are looking to purchase in the Bay Area with FHA financing know that the Werdmuller Group has 43 years' experience and is here to help you navigate through the transaction.
Here is a link to HUD's Appraisal and Property Requirements:
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