Are the banks making concessions on foreclosed properties? If they are what is the best approach?

Asked by B Smith, Michigan Fri Feb 13, 2009

We are looking to buy a foreclosed home. It will be an FHA loan but the home we are interested in needs carpet, dead tree removal, water damage repairs and the cabinets have been torn out of the kitchen. While we are interested in making an offer we are not sure if we can afford to giving all of the closing costs along with the addional repairs. Is it likely that the bank would do any repairs prior to close? Also wondering whether or not they may make additional concessions on closing costs.

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Alan Strange, Agent, Westminster, CO
Wed Feb 18, 2009
If you don't want to pay for the fix ups out of pocket then the 203k loan is the way to go. Keep in mind that if you are going to put an FHA loan (without the 203k loan) on the property then it will have to pass an FHA appraisal which speaks to the condition. Depending on the appraiser (most lenders do not control who gets assigned to do the appraisal) they may flag things like water damage. The biggest red flag for me is that some of the cabinets have been removed and they may say that as it is it cannot be lived in (meal preparation would be the reason).

As for repairs prior to closing the banks will not do that. We've had situations here in CO where if we phrase an inspection item as a safety concern then we've had luck with them fixing things. Items like electic problems and even a window was replaced. I can't see asking for cabinets as something that would fly personally. Hope that helps some. Good luck.
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Jason S Hill, , Sterling Heights, MI
Wed Feb 18, 2009
B Smith,

Up to 6% of the loan amount can be used as concessions to pay for closing costs and prepaid items with an FHA loan. You are only required to bring 3 1/2% of the sale price to close. That will give you any additional money left over for the necessary repairs, which the bank is not giong to make for you. We are a full service FHA lender and can take care of this for you in about seven business days from our receipt of documents. Please feel free to contact me.

Jason S Hill
First Mortgage Corporation
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Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Sat Feb 14, 2009
203k is the way to go. Most banks are not going to put any money into repairing a home so you're on your own there. However, most lenders won't lend money on a house that is damaged. The 203k loan is a type of FHA loan that lets you finance the cost of repairs into the mortgage. A little bit of advice though - 203k loans are very complicated and in a lot of cases take a bit longer to close. Because of this, some banks won't accept an offer that has this type of financing attached to it. They don't want to deal with the trouble when they can just lower the price and get a cash buyer. Do yourself a favor and work with an accredited buyer's agent who has handled many negotiations with banks before. If you go into it by yourself or with an inexperienced agent then I can tell you with almost 100% certainty you won't get a deal to go through

Good luck!
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Sonya Loose, Agent, Beaverton, MI
Fri Feb 13, 2009
B Smith, congratulations on being a buyer in this market! You are taking advantage of great home prices, low interest rates and tax credits!!! I have seen banks make some repairs prior to closing. The best thing would be to have your agent present what you are asking for. The FHA 203K loan is also a good option for you. Good luck and if this doesn't work out there should be many more great homes available.
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Dallas Texas, Agent, Dallas, TN
Fri Feb 13, 2009
You can request seller contribution via sales offer, work with you buyers agent and mortgage broker on amount . Many instances bank will reduce seller contribution.

Foreclosures are sold as is if to much or expensive best search for a home does not require that much work.

If the home would not pass "live in condition" upon closing you COULD BE WASTING MONEY it may not pass appraisal .
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Maureen Fran…, Agent, Birmingham, MI
Fri Feb 13, 2009
The bank will not do any repairs prior to close. The could take additional concessions. Hard to know. Are you looking at getting an FHA 203 K loan. That could give you money to do the repairs/improvements.
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