Now for a few pointers when you are buying FHA, so you can possibly avoid a repeat of this incident in the future. FHA has rules and guidelines for granting loans. One of the big guidelines for the appraiser is to determine that the property has NO Health and Safety issues, which include peeling paint, large holes in the walls, leaking roof, improper kitchen and bathroom plumbing, etc. You and your agent should be aware of these guidelines and prequalify each home accordingly. Then, if you move forward and get an accepted offer, make sure to get your home inspection done right away (within the first 48 hours of the contract). This will help point out Health and Safety issues you might have missed. At this point you are into the transaction about $300 (for the inspection) and may not even have your funds into escrow yet (as you have 72 hours from contract acceptance to get that done).
Based on your inspection, if you suspect that there will be FHA required repairs, this is a great time for your agent to speak with the listing agent and see how much the seller is willing to pay towards these required repairs. If the answer is $0, you have now saved yourself from a major headache and it only cost you $300 plus or minus. We never order the appraisal (which costs $450) before we have taken these steps.
Once again, have your agent fight for the refund of your FULL good faith deposit. And then thank you lucky stars that you were saved from buying a money pit for the small cost of an inspection and appraisal. Dare to Dream.
Shel-lee Davis, CDPE, SFR, QSC
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
Sorry to hear that the deal did not work out. You say that the home needed major repairs. Were these major repairs mentioned by the Appraiser in their report? If so, then your Lender would consider them safety & soundness issues and require that they be repaired prior to close of escrow. Now the seller is not obligated to agree to pay for or make said repaires. And maybe there is another buyer who would agree to pay for the repairs to be made. Thou, does the seller want to take that chance? Your Agent could have pointed out to the seller that it would be in their best interest to pay for and complete the repairs and close the escrow with you. The seller will have the same issues with any future prospective buyer and Appraiser, as these repairs must be disclosed along with the appraisal report to any future buyer and their Lender. Furthermore, removing the FHA option will not solve the issue either as Conventional financing will require the repairs be made prior to close of escrow as well. This will end up costing the seller more money and time starting over. I do not know of many sellers who would roll the dice in the hope that MAYBE they can find a buyer to pay for the repairs.
With regards to the $250.00 fee. As long as you cancelled the agreement within your due dilligence period as per the contract, then you're entitled to a full refund of your deposit. Speak with your Broker and have them make this clear to the Title Company. The Title company needs to bite the bullet and take the loss. They are not the only ones to lose money in this transaction. Good luck and do not give up on the process as you will find a home!
Sorry to hear about your situation. When a seller accepts an offer from a buyer with FHA financing, the seller is not required to agree to pay for the repairs required by the FHA appraiser - they have the option of declining. Just because the MLS listing said they would accept FHA offers does not mean that the seller is agreeing to pay for all FHA required repairs. The fact that your offer was accepted with the FHA financing disclosed shows that they WERE willing to work with an FHA buyer, so the agent was not wrong in the least for posting that the property "will go FHA" - this simply means that the seller is willing to consider offers with FHA financing (which cannot be denied, as your FHA offer was indeed accepted).
Unfortunately, the fees that you pay for he appraisal and inspection are fees that you will just have to write off if you do not end up going through with the purchase - that is the reason you pay to have these done, so by investing a small amount in the investigations, you can save yourself possibly many times over that amount or more if you go through with the purchase then discover a major problem, giving you the opportunity to back out of the transaction if you find something you do not like (such as multiple repairs the seller will not agree to pay for). As far as the escrow cancellation fee, that is not uncommon to be charged by escrow companies, and is usually divided between buyer and seller. This fee should have been disclosed in your original escrow instructions - take a look and see.
Hope this info is helpful - sorry again about your unfortunate situation. Good luck in your search for a great home!
Coldwell Banker Residential Brokerage