Options for financing a foreclosure property

Asked by Pradeep, Philadelphia, PA Thu Aug 18, 2011

I have a contract to buy a investment property. The property has few cosmetic issues ( No carpets, pet odor, some holes in wall etc) currently there are no carpets/floors in first and second floor. I was just informed that mortgage was denied due to missing carpets and other items. Sellers (one of the big banks) are not willing to spend a single penny to fix anything :( what are my options for financing in this situation. Any lenders who may be able to help can contact. I am putting 25% on 200K property

Note: this is an investment property and hence 203k financing would not apply

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R. Eric Axel…, Agent, Cherry Hill, NJ
Thu Aug 18, 2011
Hi Newbie, I would call Alan Openshaw below. I have spoken to him before and he is very responsive and timely. Good luck to you!
Web Reference:  http://www.kurfiss.com
1 vote
Pradeep, Home Owner, Philadelphia, PA
Sat Aug 20, 2011
Thanks everyone for your kind advises. I am still looking for a solution, So far couple of lenders seem promising but you won't know until close
0 votes
Philip J. Cu…, Agent, Feasterville, PA
Fri Aug 19, 2011
Newbie the person that should be helping you is the person you are paying and that is YOUR Agent if you don't have one you should get one or PAY for a REAL ESTATE ADVISOR. The reason for this is simple in one ward ACCOUNTable to you. This is simple because your Agent should know the finer points of your deal and all your information. Anyone else is only shoot in the dark I don't know everything but I know people who know alot about everything. Now run don't walk to your agent or find one to work with that you trust.
Philip J. Cunningham Sr.
VIP Realty Corp
215-725-5700 X49
Web Reference:  http://www.GreatPARE.com
0 votes
James Ryan, Mortgage Broker Or Lender, Leesburg, VA
Fri Aug 19, 2011
Hi again Newbie...
With respect to Ed, whom apparently thinks he knows ALL lenders/sellers issues using a blanket statement...
I have had TWO sellers (Both Banks) this month alone that allowed for the buyer to make repairs to a home to clear appraisal conditions. One was plumbing, the other, a well and septic issue including turning on the electricity so the appraiser/home inspector could test appliances. The buyers did it at their cost and risk with permission(s) from the selling banks. The buyer's agent put the electric in his name. Bottom line, thinking outside the box and asking got us from no sale to closed sales.
You never know until you ask and/or try. Trust me, the sellers appreciate the "bird in the hand" especially in this market.
Best of Luck
Jim, American Bank
0 votes
Ed Beck, Agent, Boonton, NJ
Fri Aug 19, 2011
You should be able to close with an escrow hold back. They are not going to allow to do ANY work in the property prior to closing (ie install new carpet/flooring). If you hold $5,000 or so in escrow to make the repair after closing, that should do it...if that's not feasible, then there are conventional reno loans available out there. Don't give up, you really just need a creative loan officer...doesn't sound like anything a creative loan officer couldn't overcome.
0 votes
James Ryan, Mortgage Broker Or Lender, Leesburg, VA
Fri Aug 19, 2011
Hi Newbie...
Sorry to hear of these last minute issues. There are, in fact, lenders that will still lend without carpeting, however, depending on the walls, you may still have an issue or two. However, if the holes are in interior walls and NOT part of the "structure", that should not be an impediment to the financing.
I assume your contract states "as is", and this is why the selling bank is not cooperating to get this house financed. Is that the case?
You can also fix the walls and install cheap carpet and stick with the lender you are working with, have you considered that option?
Best wishes, Jim American Bank.
0 votes
Benjamin R.…, Agent, Philadelphia, PA
Thu Aug 18, 2011

I echo the other agents sentiments- I am surprised that a bank will not finance just because of carpet. Is there anything else wrong?

It is really a matter of whether you want to front the money to put in the carpets yourself. You can fight with the bank (futile), walk away, or do a ROI analysis on just putting in cheap carpet yourself to get the deal to go through.

Give Randy Szeg of PNC a call. He may be able to help you out.

0 votes
Larry Lichtm…, Agent, Bala Cynwyd, PA
Thu Aug 18, 2011
Hi Newbie,

Another option, provided you are protected by executed agreement and everything else (title, cert,etc.) is clear, would be to do the repairs before the appraisal. You would only want to do this if you are sure of settlement.

I've seen many investors go into properties to re-connect water lines and fix plumbing prior to appraiser's arrival. Good luck with your deal.

All the best,
Web Reference:  http://www.DJCRE.com
0 votes
John Leonard, Agent, West Chester, PA
Thu Aug 18, 2011
Hi Newbie,

I cannot believe your original mortgage company woiuld not lend based on the absence of carpet (and probably a stove). If the heater or other systems considered essentail for "livability" were also absent... then i can at least see the point, and further mortgage shopping is advised.


keep shopping for a mortage. I know of a mortgage person of whom it is my experience that "if no loan from he, then a loan simply is not possible." i am happy to pass along the contact information if you buzz me.

secondly... find and attend meetings of local real estate investors groups. from networking yo may be able to:

a. find a cash, hard money lender
b. assign the contract to some other investor.

seems to me your needs are to

1. protect the transaction in which it seems you percieve value and wish to continue to close.

2. if not protected by a mortgage contingency, safeguard your deposit monies from loss via default.

glad to help you if you feel i may be of assistance. call, text, or email.

John Leonard
Long & Foster Real Estate
0 votes
Alan Openshaw, Mortgage Broker Or Lender, Southampton, PA
Thu Aug 18, 2011
Hello Newbie,

I have lenders that will finance the rehab of the property.

Best Regards,
Alan Openshaw
Cornerstone Lending
267 992 7276
0 votes
Chris Vander…, Agent, Philadelphia, PA
Thu Aug 18, 2011
You should be able to get a loan for the property assuming it passes the test of appraising it at 200K. If not then,,,, one enters the game of putting down more money, so that the position of the bank is protected. I have never heard of a loan being denied for missing carpets, So I ask there must be something else wrong of signifcance, Maybe its that will all the items needed, the bank is not sure that you have the capital to upgrade the property so that it can be rented out, In which case the loan would be unpaid or underpaid, Banks are especially demanding with investment property, because when one is not living there, leaving the debt unpaid is easier. Look for smaller aggressive mortgage firms in the city who know the City, Not the Wells Fargo and Bank America, -s. Thanks
0 votes
Ana Barlow, Agent, Philadadelphia, PA
Thu Aug 18, 2011
Buying and financing a forclosure property from a bank is entirely different than any other property purchase.

Banks often let a property fall into greater disrepair than when they were forclosed upon, refusing to put any cash into care. The bank was fully aware that this would come up, and so should any agent be with whom you are working.

If you think this property is a worthwhile investment expend the money to upgrade the flooring and repair the "other items" you mention - you will have to once you close anyway. Be aware it is a gamble, things can go haywire in a transaction, and it may be lost cash - but it is a simple solution. A path of least resistance to achieving a mortgage and long term tangible investment.

Ana Barlow anabarlow@gmail.com
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Thu Aug 18, 2011
I would simply suggest you tell the Sellers (Big Bank = Small Brain) that either they put in a floor covering (which they 100% knew was required when they accepted your offer which included a financing contingency as this has always been the case) or you're terminating the contract and demanding your earnest money deposit back under the financing contingency in the Offer to Purchase and Contract.

Twenty years ago I used to represent the banks, Fannie -Mae etc listing foreclosures. I t took me all of about a year to realize that their arrogance was only surpassed by their stupidity. I now only help buyers with foreclosures and trust me nothing has changed. The asset managers who handle foreclosure properties for banks are all unworthy of any bonus they may ever receive. I haven't met one in twenty years who ever impressed me as being bright or simply possessing some common sense. I have found the only thing they understand is the threat of losing a deal. If they were stupid enough to accept your offer with a financing contingency then they can pay for throwing some cheap carpet into the house to satisfy your lenders minimal requirements.

If they don't then you've got only two choices, walk from the deal, or install your own floor covering though I would strongly advise you against doing this until you own the property and you've done all the other repair work, as flooring is typically one of the last things to go in.
Good Luck.
0 votes
Fred Glick, Agent, Mountain View, CA
Thu Aug 18, 2011
In order for you to get good financing, the only way to cure is take the risk and install the carpet in the house so that you can get a mortgage.

This is the way that banks do business on foreclosures. They just don't have time, patience or want to pay the money.

The only other way is to do a conventional loan with a commercial bank, but you will never get a good interest rate 30 year fixed.

Good luck!

Web Reference:  http://fredglick.com
0 votes
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