As a follow-up to my series of articles about purchasing foreclosures in the Pittsburgh area, I'd like to add a comment about buyer funding.
Banks and mortgage companies will consider all offers, regardless of the type of buyer funding. However, these companies have their preferences for the type of funding a buyer uses. In short, cash is king - and the fewer contingencies asked for by the buyer, the better.
The least desirable funding for a seller is an FHA loan. The reason is that the FHA requires that an FHA appraiser must inspect the property and make sure that it meets FHA guidelines for physical condition. This appraisal inspection is in addition to, and should not be used by the buyer instead of, a regular home inspection.
In this scenario, if the FHA requires repairs, the repairs must be done before closing. If the seller does not agree to make the repairs and the buyer will not or cannot make the repairs, then the buyer can walk away from the deal. Obviously, this is not a favorable position for the seller.
Conventional loans are more appealing to the seller. However, even with a conventional loan, the lender may have certain requirements for property condition, such as pest inspections and code requirements for electrical systems.
Buyers should be aware that if they are using a loan to purchase a foreclosure property, sellers will give preference to cash deals that come with no contingencies. In fact, sometimes a seller will accept a lower price offer under these circumstances because there is less chance that the deal will fall through.
As I mentioned previously (and this bears repeating) I do not recommend that a buyer waive the inspection contingencies, unless the buyer is very knowledgeable about building construction and the operation and evaluation of all home systems.
For a free pdf copy of this report or for more real estate information for the Pittsburgh area, visit my web site at http://www.pittsburghhomesrus.com
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