If you knew the roof was leaking when you made your offer what makes you think that they will repair it?
Depending on your lender you can escrow up to 5k in a 203b loan for repairs. You also can do a 203k loan for up to 35k in repairs. The property must appraise for the purchase price and cost of repairs for the loan to be approved.
I have done many 203k type properties with buyers in my area and if you can't end up with 20% equity based on a CMA my recommendation on fixer uppers is to look for another one. Appraisals are crazy with FHA and 203k loans. My best buyer story is a purchase price of 165k, repairs of 27k for a loan of 192K. Appraised price for ARV came in at 195k, One year latter when the owner refied out of the FHA loan a blind appraisal came in at 485k on the property.
5/3 bank in your area will do 203k loans. A particular loan officer may not do them so ask the l.o. at 5/3 for a name of someone that does.
There are a lot of things here to consider as you proceed with your purchase. The most important thing is your willingness to walk away if you do not get the terms you want. You are in control. Please, pease keep that in mind so as not to get lost in the emotion of having to get this home. There are a lot of homes for sale in this price range with out the baggage of being bank owned or in foreclosure. And feel free to mention that in a tactful way to the lender. They will get the message. Since I don't have the comparables to see if your offer is in line with the market in your area I will only say that if the bank bought it at 280K and your offer is at 318K they should be shaking your hand and doing whatever it takes to get the home sold. I don't know if there is a deficiency judgment in this case but usually the lender has a fiduciary duty to the lenders shareholders to bid at the Sheriffs Sale what is owed and other cost on the property so the lender may well have only 280k wrapped into this. As other REALTORS have mentioned most bank owned homes are sold as-is. But it never hurts to ask, and besides if the inspection report does show something major with the roof the bank has to figure that any other potential buyer will find the same thing and may walk away. Hang in there and get the terms you want. And if they do agree to make repairs make sure to have a contractor that you want to use. And always get legal advice. The cost of using a real estate attorney in a transaction like this is well worth it to head off any costly issue that may arise at a later time.
All the best,
Jefrey Paeltz, SFR
Have your roofer check if the builder used metal valleys or if they did the southern thing and did a weave valley. Metal valleys cost a little more but most roofers in our area use them as they are more durrable in winter weather I have been told.
Thank you very much for your input. We didn't know the roof was leaking when we went into contract. At time of contract/offer, we noticed one small spot in an upstairs bedroom, but it looked old and repaired. The leaks look to be a result of ice buildup in some of the valleys. We are having our home inspection next week, and I am bringing in a seperate roofer in addition to the normal inspector.
The bank purchased the property back at a sheriff's sale for $280k in September '10. The orig. purchase price was $417k in 2007 (new property). Our current offer is $318k, and it is the first time the property has gone into contract. My hope is that the bank would rather negotiate with us on this point than let the property go back on the market.
Thanksk again, and I will let you all know what the outcome is.
Please see my blog for tips and advice on buying a bnkk owned home
Any bank should know it's hard to get a loan for a home with a bad roof. Depending on the rest of your terms, there is no harm in requesting this be addressed at their expense prior to closing. I think your chances are good.
As with any offer contingent on inspection- you may ask for a new roof. I have successfully negotiated many brand new roofs and had little or no difficulty in getting them. Ask your agent to make the effort. All they can say is no and of course you have the option to walk. You really have nothing to lose. You already have the contract and can always decide to just continue with the deal. Let us know what happens.
If you do not agree on the overall condition, you can cancel the contract (i.e. inspection contingency).
Best of luck,
David Jaffe-SRES, CDPE
Recently I had a bank deal with the same issue - bad roof. We were able to negotiate the entire cost of the roof with the bank. Rather than take it off the sales price (which would only have reduced my buyer's payment slightly-where as paying for a new roof is a lot of out of pocket change!), we negotiated a 'new roof ' prior to closing. We made it contingent on buyer's approval of the roof by buyer's inspector (don't think that the banks don't take short cuts on repairs-- be very aware - you have less recourse!) We emphasized to the bank the value of the home would continue to degrade with this leaky roof - mentioned black mold issues etc..the bank saw the light.