What you are working on are the what if's... yes you are trying to prepare yourself for the worst but make the calls now with those involved with your loan and representation to get the right answers. You can get advise from those of us that may have had a similar experience but you need to get the answers to your case NOW. CAll your mortgage lender and call the agent that is representing you. Make sure you are all on the same page and know what your plan of remedy is if there is one. FHA 203K loans are much more detailed and you have to be aware of what are the remedies in YOUR case. Check with your mortgage representative if you can even include burst pipes in your rehab. If you are not able to do that you may need to find another property.
You sound as if you have a fairly good understanding here. I question whether there is an estimate of damage and cost estimate for repair here. Also, if your mortgage is a FHA203K already, consider adjusting the price downward to the bank while you add on the post closing cost of plumbing repairs anticipated. If the bank is unwilling to allow for a complete inspection of the plumbing it may be necessary to be very liberal in your estimate of future repair expense. You have negotiation challenges with the bank and your lender. Hope it works out and also hope my answer is somewhat helpful. We just had a pipe burst in our condo listing in Auburn Hills last week and will be dealing with the same thing. Your situation with a foreclosure might be better than ours...a short sale scenario. Good Luck!
Max Broock ~ Real Estate One
When the estimates are given from the contractors as part of the renovation loan escrow money, they will likely take this into account and plan for the "fix" as part of your quote. Your lender should be able to guide you on this...
Keller Williams Realty