we're under contract on a real fixer-upper, and we have an fha loan. what if the seller won't take care of items like the roof, or rotted?

Asked by Red_as_copper, Butte, MT Tue Sep 14, 2010

deck? We knew this house needed lots of work when we offered on it, but the seller's disclosure said there was an insurance claim on the roof. Our home inspector says the roof, rotten decking, damaged structural supports (A frame house), and peeling exterior paint will have to be fixed prior to closing. I found out the house is part of an estate, and I don't feel the seller is going to help us out with these issues. What then? We can't be expected to fix a lot of expensive things on this house we don't even own just to get a loan on it. We have excellent credit, but not much money for a down payment. Is the FHA our only option on a loan? The inspector said the seller will end up having to fix these major problems sooner or later to sell this house, but we don't want to lose it and we're not afraid to do the work over time. Will a bank loan money on a house that needs so much work?

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Red_as_copper’s answer
Red_as_copper, Home Buyer, Butte, MT
Wed Sep 15, 2010
Some of you mention the original "purchase contract" - are you referring to the buy/sell agreement? This is the third home I've offered on and in all of the transactions (we're in Montana), we put an inspection clause in the contract, but repairs are not mentioned in the contract. I was told by my agent that repairs would be discussed post-inspection on the inspection notice. Today when I went to fill out the inspection notice, my agent basically told me the seller (the executor of the estate) priced the house to sell and is probably not going to help us out with repairs. Would've been nice to know this before we ever placed an offer because the house needs a ton of work - more than we even anticipated. When we made our initial offer we were told there was an insurance claim on the roof (made by the now-deceased owner), that an $11000 payment for a roof had been issued, and so we thought that meant that money would go towards a roof - surely that's what the insurance company thinks too. I am looking into the 203(k) loan, so thanks for the info on that; that might really help us. The land the house is on (house aside) is worth more than what we're paying, so we don't want to lose this deal. Thanks for the help. Sounds like the agents (yes, I've had several in the course of my home search) might not be up to snuff (they're all REALTORS) because none of them have done any of the things you've mentioned.
0 votes
Wed Sep 15, 2010
Were any of these items written into the purhase contract? if not, then i wouldn't expect the seller to fix it and FHA won't finance it unless you get a 203K loan ( for fixer uppers). At this point, if you're still within your inspection period, back out of the contract or start looking into 203K Rehab Loan

Elena Ollick
Amerivest Realty
Faith Home Loans
0 votes
Sharon Weltn…, , McKinney, TX
Tue Sep 14, 2010
You won't get a loan! FHA guidelines are very strict!
0 votes
Jacque Erick…, Agent, Minneapolis, MN
Tue Sep 14, 2010
First ask youself is the property really worth what you offered and do you still want it. you should have had a clause that allowed you an out based on an inspection and/or a clause for financing that addressed work orders. If you had these clauses you should be able to back out or re-negotiate. If you still want to proceed then switch to an FHA 203K loan. If the seller want to still sell to you - he may reduce the price by at least the cost of the roof just so he can keep the insurance money.
0 votes
Jeffrey Kropp, Agent, Chicago, IL
Tue Sep 14, 2010
Your only option is a fha 203k rehab loan only a few lenders do these (well)
0 votes
Scott Godzyk, Agent, Manchester, NH
Tue Sep 14, 2010
These items should have all been addressed on your purchase and sales agreement when you made the offer. Anything you can see with teh naked eye that would not pass the FHA appraisal/inspection should be addressed before they find them, hidden defects such as termites, well, septic etc are the only issues that could affect your purchase if everything else is addressed up front. if there is that much stuff, you may want or need a fha 203k to get money to fix them....
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