Home Buying in Butler>Question Details

The Hemingwa…, Home Buyer in Butler, PA

For a USDA loan, do I need to include the required inspections (home, well, etc) as contingencies on the bid?

Asked by The Hemingways, Butler, PA Fri Sep 30, 2011

We recently lost a bidding war to a lower bidder who waived all inspections. We're using USDA financing and were told by our realtor that we had to include certain inspections as contingencies on the bid - namely well, sewage, and radon tests. I know that USDA requires these inspections eventually in order to improve financing, however I'm not certain we needed to include them as contingencies. If any of the inspections had come back bad, USDA would presumably have denied the loan, kicking in the financing contingency (which, of course, the competing offer included as well) and allowing us to back out of the purchase contract.

Would it have been possible in this situation to waive all the inspections on the bid and still use USDA financing?

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Your realtor was partly correct. USDA requires bacteria testing for the well (well flow is not required unless there is some specific indicator that flow is an issue). Radon is not required for USDA., but is recommended due to potential dangers. A septic dye test is required and must pass. Distances between well, septic and leechbed must meet FHA current requirements,

You need those tests completed to be APPROVED for financing, so at some point they would have needed to be performed. It becomes a contract (agreement of sale) issue to start out an offer with no inspections, then "add them later". Contract requires the type of financing to be disclosed, at which time the listing agent would point out the same thing - the tests will need to be acceptable to complete the financing. Without opting for the tests up front, it would be a breach of the listing agents responsibility to the sellers to accept that agreement, ignoring the ultimate need for the tests. The sellers can choose to refuse the offer, counter with a willingness to allow the tests (its still their property), or move on to an offer which does not raise the question of the condition of well and septic. In my opinion, your agent handled it correctly. In fact, attempting what you suggest would have been misleading and inappropriate for the agent to be involved in.
Diane, also in Butler, PA
0 votes Thank Flag Link Mon Nov 18, 2013
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0 votes Thank Flag Link Fri Nov 1, 2013
If the selling agent advises her clients to accept the contract based on a USDA loan... that agent should know the requirements of the loan and advise the sellers accordingly knowing that at some point those inspections will be a requirement of the loan.
so, maybe you don't have to list them as a contingency but if the selling agent doesn't pick up on it they should loose all commission for not doing their job and protecting their cloients.
It's the financing, not the inspections... or maybe like a dog chasing his tail... if the offer is fairly close, conventional or cash financing will win out b/c it's less of a hassle all around.
just my two yen
0 votes Thank Flag Link Tue Mar 5, 2013
I have updated my USDA web page today on this subject after speaking with the Pennsylvania underwriter. You can find the answer with the link below. Also included on the site is a simple USDA calculator and some other tools you may find useful. Good luck!
0 votes Thank Flag Link Wed Oct 5, 2011
Nice to see someone doing their homework on the bidding process. You do not have to list the above stated contingencies. But what is going to happen when you order these test and the seller denies entry to the property? The bank probably isn't going to order those inspections for you. So now your in default because the bank can only deny your loan based on your inaction to get the inspections. What are the odds that the seller would deny those inspections? Pretty high if I'm their agent. Overall pretty low.

Unfortunately, not all agent fully know the sales contract, let alone the potential outcomes possible. Luckily this keeps me in business and well I don't mind saying business is good.
0 votes Thank Flag Link Fri Sep 30, 2011
Hello, It is possibile to waive all inspections on your offer. The agents have been taught to protect ourselves and recomend you do inspections which then must be on the contract. However as you mentioned, DONT ask for the inspections-waive them, and if its a concern then mention it to the lender and they will make it a requirement for the loan. USDA dosent require well and septic or radon, it only needs to be on there if its a concern of yours. Again in this life it protect yourself thinking and drilled into us at all our classes.
0 votes Thank Flag Link Fri Sep 30, 2011
WELL, SEPTIC AND PEST ARE ALWAYS REQUIRED FOR USDA. ONLY EXCEPTION IS IF YOU DON'T HAVE A WELL OR SEPTIC. THEY WILL BE A REQUIREMENT FOR THE LOAN WHETHER THE BORROWER WANTS THEM OR NOT. THE FILE WILL NOT GET THROUGH UNDERWRITING WITHOUT THEM, IT'S A FIRM RULE WITH USDA.
Flag Mon Nov 18, 2013
I don't think you have to include them as a 'contingency' on the offer. Typically there is an inspection period for any contract which stipulates the amount of time you have to perform inspections which you deem appropriate.....at your discretion.
0 votes Thank Flag Link Fri Sep 30, 2011
Hello, You do not have to do any inspections and they are not required. However any inspections you do want to do, should be either on the offer or an addendum to the contract.
0 votes Thank Flag Link Fri Sep 30, 2011
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