Question Details

Furrycoral, Home Buyer in Orange County, CA

Worried about home appraisal, private sale within family

Asked by Furrycoral, Orange County, CA Fri May 14, 2010

I am worried about the home appraisal, maybe I shouldn't be. I'm taking a mortgage for half the appraised value, the rest is a gift, so the LTV is very good. What I'm worried about is any conditions that the lender may put on the home for repairs because there are some things that really need some fixing up - roof, termite damage (mostly cosmetic not structural), badly worn exterior paint, etc. This the a house I'm buying from my mom, private sale, no realtor involved. I've been pre-qualed with two lenders and locked in rates. I am tempted to let both of them do an appraisal so I can get the full underwriting picture, to see if either one will put any condiutions about wanting pest inspections or repairs. Then pick the lender that is less fussy about it since the LTV is going to be really good no matter what. I understand I would eat the appraisal fee. But would I also end up paying processing fee to both lenders? I'm unclear on where the commitment to a lender really starts.

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You should be able to tell on his GFE if it's an FHA product. The down payment would be 3.5% most likely. If it's not on his GFE, it should be found on his commitment letter or pre-approval letter. This probably isn't because of the LTV created by the gift of equity...but sometimes one uses FHA anyway because of income debt ratios, underwriting guidelines, etc. I would ask anyway. Also, the termite could be on the GFE because it's commonly seen and one errs on the side of caution when quoting fees. If your contract doesn't call for it, your lender shouldn't generally. Again, you're right to question your lender directly and remove any doubt. Repairs to paint, health and safety items, etc. usually are of the nature that can be completed pretty easily in a weekend.

Are your lenders local? You could ask your loan officer to swing by - also, an idea is to pay an appraiser a small fee to do a walk thru inspection. I'm sure there are plenty who would charge well under the price of 2 separate appraisals for 20 minutes of their time to render an opinion on the level of required repairs to meet the guidelines of the loan you are planning to go with. When I have any question, I'll pay an appraiser I work with and trust for a second set of eyes.
1 vote Thank Flag Link Fri May 14, 2010
A couple nuggets of food for thought: Are you going FHA? If so, the initial appraisal done by the first FHA appraiser will "stand in file" for a period of time - it was 6 months - I believe that period was just shortened - any lenders out there to confirm that?.... but regardless, you won't just be able to get a 2nd appraisal independant of the first one on an FHA loan. If you're going FHA - you'll have to deal with peeling paint issues, no matter who appraises it, especially if we're looking at an age of concern for lead based paint. Best to cure them pro-actively and do so in a manner that keeps you safe from lead exposure - get a contractor who is certified in the new EPA standards. Breathing Lead Dust ... no bueno.

Secondly - if you don't want termite to be a condition, don't include a termite inspection in your sale documents. If it isn't called for in the sales documents provided to the lender, it won't be conditioned for UNLESS the appraiser sees obvious signs of infestation - in which case - don't you really want to fix those things anyway??

Good luck - and family or not...sometimes especially with family .... consider hiring a Realtor who will work with you on a fee for service basis to help you through some of the sticky, potentially expensive issues.
1 vote Thank Flag Link Fri May 14, 2010
Thanks for the info Jeri. It's not FHA to my knowledge, but one of the loan processors I am working with is an expert about FHA loans and his GFE mentioned a termite inspection would be required, and that only appeared in the mailed GFE but in none of his emailed estimates. So I am suspicious about that and will try to get him to remove that condition in my negotiation. You are right I would want to fix those things anyway but my concern would be that repairs could take longer than the time of the interest rate lock.
0 votes Thank Flag Link Fri May 14, 2010
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