General Area in Philadelphia>Question Details

Gab, Home Buyer in Chester County, PA

What happens if an FHA loan for an agreement on a home if pending water, septic and terminte approval if the testing fails?

Asked by Gab, Chester County, PA Thu Feb 10, 2011

If sewer does not pass on a home, will the fha loan approve the loan and escrow money to have the system fixed. I currenly have a pending sale on a home in chester county pa

Help the community by answering this question:


Depending on how your agreement of sale is written. You could have the option to opt out . Are the seller could put in an extension in the contract to give them time to correct the problem.
0 votes Thank Flag Link Fri Feb 11, 2011
Hi Gab,
I agree with Edmund. Septic, sewer, termite and other utilities functioning are the standard requirements from FHA lender and have to be satisfied before the loan approval. Buyer and seller have to reach an agreement who is going to do the repairs or split the responsibilities. Review lender appraisal report for repair requirements and get an estimate for the repairs by licensed contractor before negotiating. It depends on how desperate buyer want this property and whether seller would agree to do certain repairs. If such agreement can't be reached and the repairs can't be satisfied, seller would refund the escrow and the deal is terminated based on the contingency of buyer's financing. Ask your agent/attorney to negotiate with seller. Let me know if you need legal referral or you need my help as an agent if you don't have one yet.
Good luck!

Qing Hui Wang(Emily)
Realtor Licensed in PA
Bilingual in Mandarin
Century 21 Advantage Gold
5267 Roosevelt Blvd,
Philadelphia, PA 19124
Prefer Cell: 267-254-4405
Office fax: 215-537-4818
Voice mail: 215-671-4700 x 1407
Office: 215-537-0200
0 votes Thank Flag Link Fri Feb 11, 2011
In the past, a lender may have permitted monies to be escrowed for the future replacement of the on-site sewage disposal system, i.e. septic sytem. However, lenders today are requiring that the replacement occur prior to settlement as a condition of funding, in my experience.

Upon determining it is a requirement after consulting with your lender, it would appear that your options are to either extend settlement to allow for replacement (obviously after negotiating who is going to pay for it) or terminate the agreement citing the applicable contingencies.

Good Hunting!
0 votes Thank Flag Link Thu Feb 10, 2011
Probably not. The seller may have to fix *or someone fix* the problems before closing.
0 votes Thank Flag Link Thu Feb 10, 2011
FHA Lender most likely won't approve loan if they know that these problems exist. But it depends on many factors. Consult your real estate agent/broker or an attorney.
0 votes Thank Flag Link Thu Feb 10, 2011
In general FHA does not like escrows for repairs, except in some cases where a repair cannot be completed due to weather condition. You should check with your agent, and your lender to answer your question in your case.
0 votes Thank Flag Link Thu Feb 10, 2011
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2016 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer