Home Buying in 95320>Question Details

Jvalk03, Home Buyer in 95320

when buying a home under the flip rule with a FHA loan do the repairs found in the home inspection need to be fixed before closing?

Asked by Jvalk03, 95320 Wed Nov 3, 2010

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William Polack’s answer
The repairs don't have to be fixed prior to closing, however, as mentioned below, you can request the seller fix it. Under NO circumstances are you to pay to fix anything in the house (you don't own it until after the closing). So, what to do if they say NO and the appraiser and lender says it must fixed or you don't close? Well, you have 2 choices, well 3 actually. 1) Walk away and find another house 2) Obtain an escrow up to $5000 for repairs to be completed after closing (you'll have 60 days to complete the repairs). 3) Do a 203K loan if the repairs exceed $5000. The 203K loan allows for up to $35000 in repairs or 110% of the after repair value, whichever is less. My company offers the escrow on all type loans (conventional or FHA) and the 203K non-structural and structural. If your loan officer needs help in getting you financed, let me know and I'll see if I can give him/her ideas on how to get you into the house. The more people own homes, the better are industry prevails, so I don't mind helping fellow Loan Officers.
0 votes Thank Flag Link Thu Nov 4, 2010
Thank you all for your information..The home inspection is being completed tomorrow..
0 votes Thank Flag Link Thu Nov 4, 2010
Hi Jvalk03,

The 90-day flip rule is a secondary concern. Your primary concern is any health & safety issues that might cause you physical harm or prevent your FHA financing. When an FHA appraisal is performed on a home, the appraiser is really only looking safety hazards and that the house is structurally sound.

In various areas of the FHA Appraiser's Handbook there is clear direction to have the Appraiser note safety/hazards for repair. For example:

"Required repairs are limited to those repairs necessary to preserve the continued marketability of the property and to protect the health and safety of the occupants."

"The property must be free of all known hazards and adverse conditions that: may affect the health and safety of the occupants.."

"The appraiser must note and make a repair requirement for any health or safety deficiencies as they relate to the subject property,.."

What actually constitutes a "health & safety" issue was revisited in a 2005 Mortgagee Letter (this is how FHA changes/clarifications are announced). There are many examples of items that DO and DO NOT fall under the category of a "health & safety" issue. http://docs.steven-anthony.com/ML05-48-Repair-InspAppraisalP…

Best, Steve
0 votes Thank Flag Link Thu Nov 4, 2010
Here is the correct answer to this question: Under FHA rules usually anything involving safety has to be fixed. Smoke detectors have to be properly installed and working; kitchen vents have to be installed and working properly; broken windows have to be repaired; kitchen stove has to be installed and working correctly. You can read the rest of the list either on the FHA site or by googling it. The FHA sends only FHA approved appraisers to the property to see if the property is ready for them to make a loan. If these obvious things are not corrected, they will not pass the property for the loan. These items must be repaired. The appraiser then comes out and looks over the property again. Many conventional mortgages usually follow FHA guidelines.
0 votes Thank Flag Link Thu Nov 4, 2010
The home inspection is not tied into teh flip rule. Depending on what type of mortgage you are obtaining, is what the appraiser will recomend or mandate fixing. For FHA loans teh appraiser will be quite picky as FHA rules are strict, In a conventional loan, as long as the value comes in, they may not ask for anythinbg to be fixed. if you are finding items that need repair during your inspection, you should ask thenm to be repaired as part of your home inspection contingincy.
0 votes Thank Flag Link Thu Nov 4, 2010
Yes, Chris is correct - inspections are primarily for the buyer to conduct his or her investigations on the property to see if it's still worth buying. The appraisal -- which your lender sends out --- will let you know if there's some sort of repair that will need to be fixed, but these are health and safety issues such as exposed rebar, etc.

If there's something that comes up during your inspections that you'd like to have repaired, you can simply request those repairs to be done. The seller isn't necessarily going to complete any or all of them, but you can certainly ask, or request credit for them. Good luck!
0 votes Thank Flag Link Wed Nov 3, 2010
Hi Jvalk03,

Repairs don't have to be done if they are found in the inspection. However some of them maybe required to be fixed by the lender if they are called out during the appraisal. It all depends on the lender and their under writer. The home inspection is for your peace of mind and gives you the knowledge to make an sound purchase. If there are repairs in the report that you feel need to be fixed, you can have your agent request for them to be repaired.

Good Luck!
Chris Blasic
0 votes Thank Flag Link Wed Nov 3, 2010
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