Foreclosure in 85308>Question Details

Howard, Home Buyer in Peoria, AZ

What missing items and when do they need to be in place when purchasing a single family foreclosure via FHA closing? Who pays?

Asked by Howard, Peoria, AZ Sat Sep 19, 2009

We are getting conflicting answers between our agent and our mortgage banker. How do missing appliances, holes from stolen speakers or light fixtures, trim,etc. affect a FHA closing? How do they affect the FHA appraisor's valuation? If the items need to be in place before the closing, how are they protected from theft prior to when we close and have the keys?

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You may want to look at doing an FHA 203k loan program to buy the home, it allows you to finance all the costs to repair the home and even put in any appliances or upgrades you want.
0 votes Thank Flag Link Sat Sep 19, 2009
Hi Howard,

I forgot to address the theft issue.

The party responsible for the protection of the property from theft depends on what was agreed to in the purchase contract. Usually with a private seller, the private seller is responsible for the protection of the property. However, with an REO foreclosure, the responsible party varies depending on the purchase contract and any addendums. With an REO foreclosure, the seller could accept that responsibility, but they could also allow the contract to be cancelled b/c of theft/vandalism, etc. It all depends on the agreement you have with the seller that will be detailed in the purchase contract.

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PAUL WELDEN
HomeSmart
602-503-4010
Buyer's Agent Realtor
0 votes Thank Flag Link Sat Sep 19, 2009
HI Howard,

FHA's guidelines ensure that the property is safe and in livable condition, and this can be open to subjective opinion. Also, mortgage bankers can put overlay restrictions or additional guidelines 'on top of' FHA's guidelines. So, the best answers you can get should come from your mortgage banker, but your Buyer's Agent should also be knowledgeable of FHA's minimum property standards as well as your mortgage banker's requirements. Any items required to be repaired or corrected should be noted on the FHA appraisal report. Also, FHA does not require termite inspection reports, but some lenders require them. So, rely on the information from your mortgage banker because that is the person/company who determines if you get the loan or not.

Appliances - stove/oven is required, but I believe FHA relaxed that guideline, but most if not all lenders still require a working stove/oven in the property; also if there is a designated place for the dishwasher under the kitchen countertops, then that will also be required.

Electrical - no exposed electrical wiring; electrical system for home must be in operational condition

Holes in Drywall - could be considered cosmetic but if insulation is exposed or other "harmful" items, then it would need to be corrected.

Any decent Buyer's Agent should be able to get lender required repairs corrected by the seller and most, if not all, of the time, at the seller's expense. YOu see, FHA appraisals are attached to and associated with the property for 6 months. So, if the seller does not adhere to the FHA appraisal requirements for you, then they cannot sell the house to another FHA buyer for another 6 months unless they adhere to that appraisal. This is why 99% of sellers will do what is required according to the FHA appraisal. So, get an FHA appraisal and you will know what repairs are required based on that report and what your mortgage banker tells you.

YOu may also want to consider to an FHA 203k loan. It allows you to add in to your mortgage the cost to do repairs and then complete them after you own the home. Get more info here at http://www.203kContractors.com .

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PAUL WELDEN
602-503-4010
HomeSmart
Buyer's Agent Realtor
0 votes Thank Flag Link Sat Sep 19, 2009
Based on my experience, the missing items you listed would mean the FHA appraiser would not approve the home in current condition for an FHA loan. If the seller wants to sell with FHA mortgage those items would have to be in place and fixed. This sounds like a candidate for an FHA 203K mortgage.

The above items are the property of the current owner ( seller ) and it is the duty of the seller to protect them from theft. Our group lists homes for Fannie Mae, and Fannie Mae occasionally gets stuck fixing items that have been stolen. Presently, we have one listing where the Air Conditioning unit was stolen after the buyer's offer had been accepted and before closing. We know this because we inspect the properties every 7 - 10 days....and we take pictures ( 30 or more per inspection ) for comparison. We have requests for bids out now on replacing the A/C.

Good luck with your purchase.
0 votes Thank Flag Link Sat Sep 19, 2009
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