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Mary Koenig, Real Estate Pro in Burnsville, MN

Short Sale: FHA loan and de-winterization

Asked by Mary Koenig, Burnsville, MN Sun Dec 7, 2008

On a short sale the FHA appraiser calls work orders which include de-winterizing the home. The lender for the seller, the negotiator, tell me, the listing agent that the agents do not do this and it is the responsiblity of the buyer. The loan officer tells me the buyer is taking care of the work orders. Should the listing agent be required to do the de-winterizing of the property so the appraiser can go back an approve the loan for closing?

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It really depends on what the bank says. Scott gives you the "what is typical" and you should use this to fight for what you feel is right. However, I have worked with many banks who don't care what is typical. They do what they want and can you do it their way or move on to something else. At the end of the day, the answer to your question is, whatever the bank demands. Keep in mind to that you do owe fiduciary responsibilities to the bank here.

Cameron Piper
Web Reference: http://www.campiper.com
0 votes Thank Flag Link Sun Dec 7, 2008
Hi Mary,
The buyer would be responsible unless the pruchase ageement says otherwise. I try to avoid FHA loans on short sales and foreclosures because of issues like these but that's not always possible. If I was the listing agent I might just pay for the dewinterizing to get the deal done but if the buyer's lender requires it it's the buyer's issue. The buyer agreed to the work orders, it's a work order.
Good luck,
Michael Doyle Realtor
0 votes Thank Flag Link Sun Dec 7, 2008
Hi Mary!

To reduce ambiguity, the responsibility of dewinterization should have been spelled out in the contract or purchase agreement. By adding a clause that the seller is responsible for having all utiliites turned on the the home prior to the inspection and/or closing, responsibility would be clearly spelled out for all parties. If the seller has an as-is clause and there is no other clause addressing dewinterization, the buyer could be expected to assume these costs. Review your purchase agreement with your agent/broker to resolve.

Hope this information is helpful!
0 votes Thank Flag Link Sun Dec 7, 2008
Wait. This is a short sale? Then the "smiths" own the property? THE BANK IS NOT THE SELLER IN A SHORT SALE. Please, let's not forget who the principals to the transaction are.

I don't know where you are or what kind of contracts you use, but HERE the answers to this question are in the contract. And, a listing agent is not party to the contract. So, if the listing agent or someone else is responsible for this, then it would be pursuant to another agreement. Read the agreements. If it is truly not spelled out in the contract that there must be an FHA appraisal and utilities must be in service (typically the sellers responsibility), then it becomes a negotiating point, and the seller is not in default by refusing - of course, they probably won't get the sale completed if the buyer can't get the financing... but it could be the buyers that are in default if the contract didn't require it.
0 votes Thank Flag Link Sun Dec 7, 2008
Sounds like it wasn't clearly specified in the PA. The cost is typically born by the buyer for these items, but if it is a deal breaker it doesn't cost much in the grand scheme of things.
0 votes Thank Flag Link Sun Dec 7, 2008
It is 100% the responsibility of the listing agent to take care of de-winterizing, making sure the systems work and then re-winterizing. As a big listing agent of short sales and REO properties i know first hand the problems associated with this for me as the listing agent. As teh listing agnet it is my job to make sure the sale goes smoothly through all aspects of the process which yes includes inspections an appraisals. The one thing i do, is post in my mls listings that the buyer is responsible for the cost of turning on and off all utilities including winterization. I charge $150 if FHA heat and $300 for a fhw system. If the electricty is off the buyer has teh responsibility of turning it on in thier name, same thing if it is natural gas. If it is propane or oil and it is out. They are responsible to purchase the oil or propane. By listing it upfront i am covered. I am the conductor, band leader and overall overseer of all aspects so it is done right the first time. If you leave it up to the buyer you do not know if it is beeing done right or just cheap which can cause problems in its own right.

The key is disclose everything ahead of time, cover your butt and watch over everything so the appraisal goes smoothly and teh sale closes on time and without problems. good luck with your sale
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sun Dec 7, 2008
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