Dear Kari,
My wife and I are in the process of buying a home.
We found the home we want, which happens to be a short sale. We thought we did everything right. We were pre-approved for the loan and now the appraisal has come in and we are being told that we will have to pay for items to be fixed.
Also, we will not get reimbursed even if we are not allowed to purchase the home. Please help.
Answer:
It seems like you and your wife have come across a common problem. There are a few things you need to know when you’re buying a home in today’s market.
Short sales and foreclosures are usually sold “as is.” This means what you see is what you get — the current owners are either unable or unwilling to make any of the necessary repairs.
So if you really want that particular home in which the lender is requiring certain repairs, it needs to be brought up to their standards for the financing to be obtained.
The first word of advice is the home is not yours. Any work you do to that home will all be for naught if you do not complete the purchase.
With that being said, you must first gain permission from the seller to enter the property and make any changes. Most sellers are unwilling to let you do that, in case you get hurt or something else happens, because at that point the seller is still responsible.
Different loans have different requirements for the property to be in acceptable condition in order for the financing to go through.
Most loans will require the property to be in a standard usable, safe condition that will not require any immediate, major repairs.
In the event you are working with a Federal Housing Administration (FHA) loan, it typically requires an appraiser to inspect the property and comment on any deficiencies in the home’s condition.
Some examples we have been seeing recently are: loose or peeling paint, broken windows, missing floor coverings, exposed wiring, health and safety issues such as a trip hazard or evidence of a leaking roof.
In order to obtain a loan, these conditions must be corrected before the house is yours. The lenders do not want to lend on a home that is in sub-standard condition.
When working with your Realtor, let him or her help guide you through the process. When viewing a home before you make an offer, it is always helpful to get some feedback from the listing agent. This way you may find some up-front information, before you spend the money on an appraisal.
If the home has been in contract with another buyer and has come back on the market, have your agent talk to the listing agent to find out why. Was it a problem with the home? That question alone can save you a lot of time and money by not following the same path the last potential buyer was led down.
Regardless of whatever type of financing you end up using, sit down with your loan officer and go over the program requirements to help avoid any surprises or mistakes.
Kari McCoy owns the Kari McCoy Group, Residential Real Estate, at Lyon Real Estate. Call her at (916) 941-9540.
