I wanted to look at a house (it's a foreclosure). The seller told my realtor the pipes in the house had been

Asked by R, 01760 Sat Feb 7, 2009

frozen (amount of damage not known). The realtor says there is no point even looking at it as a bank wouldn't approve a loan on a house that needs that kind of work. The seller had mentioned something about needing a hold back from the lender. What does this all mean? How can they expect to sell a house if no-one can get a mortgage on it?

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Val Cloutier, Agent, Londonderry, NH
Sat Feb 7, 2009
R, you asked a good question, and if your agent (not necessarily a Realtor!) isn't familiar with all of the many products that are available, he or she should have suggested that you ask this question of your lender instead of giving you false information.

Hopefully you are working with a lender who is knowledgeable on the various products that would work best for YOUR situation. The lending world is not a 'one-size-fits-all' especially in these shaky times. MANY of the properties that are closing each day are properties with these sorts of issues, and the program of choice seems to be the FHA 203(k). This is a special rehab loan, which allows you to borrow the funds to rehab the house as necessary. While this program might not work for everyone (you would need to qualify for the total amount of the loan) it's a good way to get into a property that needs work.

I suggest that you speak to your lender about the program--hopefully they're familiar with the many different loan products available. Not all of the foreclosure properties need such extensive work, but many do, and if you're not afraid to put the work into a property, the FHA 203(k) streamline is program might work well for your needs..

Web Reference:  http://www.SNHhome.com
1 vote
Territory.c…, Agent, MA,
Sun Feb 8, 2009
The sellers (bank) hope an investor will come along and pay cash ... Problem is Banks hold no liabilities on the properties, they just get stuck with them and they will sit until someone comes along with the advantage to buy it as is with cash. Unfortunately for them this narrows down potential buyers and unfortunately for the property it means it will sit without being cared for. Proceed with caution because the property could be Pandora's box of problems.

Good luck!
Web Reference:  http://sanfordmullen.com/buy
1 vote
Donna Moy-Br…, Agent, Hudson, MA
Sun Feb 8, 2009
All of the Realtors here have provided good advice with regard to proceeding with caution and with regard to financing options that may be available to you. And yes, I have seen a number of bidding wars lately on these homes with buyers who have cash in hand with construction experience or close ties to a contractor. But If decide to investigate the possibility of buying one of these homes, and you qualify for one of these rehab loans, your mortgage will be based on the improved value of the home. (I have had a few buyers ask this question and they were unclear about the fact that they had to qualify for the larger loan amount ) My understanding is that it works much like a construction loan, and the bank will pay the contractors directly, after the work is completed. I think there may also be some local banks who have an in-house loan product similar to the 203(k) ,designed to help buyers purchase homes in need of renovation and repair ,which allow some of the work to be done by the homeowner but the lender will provide all the details of the process. There are many good opportunities available now to buyers like yourself , just be careful to weigh the advantages and disadvantages of whatever route you take and trust your Realtor enough to ask any and all questions you might have.
1 vote
Val Cloutier, Agent, Londonderry, NH
Sun Feb 8, 2009
I thought of something after I shut down the computer yesterday and wanted to add that there are actually 2 versions of the 203(k)--Traditional and Streamline. I believe there is a $5,000 minimum, and a max. of $35,000 over sale price, making this a great product for bank owned properties.

Here's a list of eligible improvements under both traditional And streamline 203(k) Programs:

* Repair/Replacement of roofs, gutters and downspouts
* Repair/Replacement/upgrade of existing HVAC systems
* Repair/Replacement/upgrade of plumbing and electrical systems
* Repair/Replacement of flooring, tiling and carpeting
* Remodeling, such as kitchens and bathrooms
* Weatherization, including storm windows and doors, insulation, weather stripping
* Purchase and installation of appliances, including free standing ranges, refrigerators, washer/dryers, dishwashers and microwave ovens
* Repair/replace/add exterior decks, patios, porches
* Window and door replacements and exterior wall re-siding
* Basement finishing and remodeling
* Basement waterproofing
* Septic System and/or well repair or replacement
* Lead-based paint stabilization
* Accessibility improvements for persons with disabilities

Additional Eligible Improvements Under The Traditional 203(k) Program Only

* Major rehabilitation/Repair, such as relocation of loan-bearing walls
* Room additions
* Repair of structural damage
* Repairs requiring detailed drawings or architectural exhibits
* Landscaping or similar site improvements including: terraces, correction of grading and drainage problems, tree removal if the tree is a safety hazard, repair of existing walks and driveways if a safety hazard, fencing, new walks and driveways and general landscaping work

HUD has a lender list here: http://www.hud.gov/ll/code/llslcrit.cfm
See if your current lender is on the list--you want to work with somebody who has put one of these loans through in the last few months (rules and regs change rapidly in today's lending world...)
1 vote
Bill Eckler, Agent, Venice, FL
Sun Feb 8, 2009

There are still cash buying investors out there looking for opportunities just like this one. They will use the "broken pipe" and hopeless to sell sinerio as leverage to obtain a good property at a very low price.

Cash is still KING....................
1 vote
John Savigna…, Agent, Hopkinton, MA
Sun Feb 8, 2009
these are all good and useful answers. they may or may not pertain to your financing circumstances, like if you are buying with fha and 3.5% down and putting every penny you have into the down payment and dont have money left for repairs. you can ask for seller credits $$ for repairs, but you need to ask your lender if this will be okay for your loan product.You need to speak to your lender and realtor for your specific situation. a lot of these homes are in such bad repair they need someone who can get a rehab loan. you could get one depending on your finances. the other thing to think about is depending on how much work the house needs, do you want or have the time to get involved with all this and do your day job as well. If you do proceed, go SLOW and make sure you understand what all the repairs and expenses are.

Good Luck,
1 vote
Mary Lyons, , Coventry, RI
Sat Feb 7, 2009

Not sure what program you are going to use for financing but there is a product out there called the 203K. It is designed for exactly this kind of home. It allows you to finance not only the cost of the home but the cost of repair. I have access to lenders who are expert in this arena. If you want more info just email me at mary.lyons @century21.com.
Best of luck to you.

1 vote
Leonardo Mon…, Agent, Palm Springs, CA
Sat Feb 7, 2009
Hi R,

You made a good point. A few months ago i was representing the buyer on a reo property and the sewer was not connect to the city line. The lender was not going forward till the issue was resolved. My client really wanted the house and the house was priced really low so they foot the bill to have it reconnected ( around 2K). Lenders will not lend on a series of issues, if the home is not in "liveable" condition they will just deny the loan. Sometimes the seller ( bank ) will fix an issue that makes a sale not to go forward. Sometimes they wont. Good luck.
Web Reference:  http://www.leonardoteam.com
1 vote
The Hagley G…, Agent, Pleasanton, CA
Sat Feb 7, 2009
Hmmmm...are you working with an experienced Realtor? If so...and you really want the home, you could get an estimate, usually free of charge, to see the cost of repair to the pipes. You can base your offer on that. You can ask the seller to pay for the repair in the form of a credit at close of escrow.

Not sure what the hold back from the lender means. What does your Realtor say?

Please make sure you are dealing with a Realtor...not just an agent...there is a differnece!
Web Reference:  http://www.cindihagley.com
1 vote
Christine Del…, Agent, Santa Rosa, CA
Tue Sep 16, 2014
One of the most interesting things I've learned as a real estate agent is how many loan products are available. As the previous person mentioned, there are rehab loans that can sometimes address these types of issues.
I think that it's important to shop around for a good lender who isn't afraid to roll up their sleeves and do this type of loan.

There are some agents who may not be familiar with those types of loans or may even feel intimidated by the process. Some loans are easier to do than others.
And, it is also very possible that your agent is trying to avoid causing you frustration and anxiety because these homes often can be very difficult to finance. You can let your agent know that you understand these types of purchases don't always go through, but that you are willing to give it a try.

Also, there are specific government websites that offer direct bank owned properties and it can be helpful to have a professional real estate agent guide you through that process. Sometimes these properties require a pre-approval with a specific lender but that doesn't mean you have to use that lender as far as I know.
http://www.hudhomestore.com or http://www.homepathcom.

The other thing to note is that even in a multiple offer situation, the first accepted offer can fall out of contract (and often does), so it's a good idea to get an offer in, even if you think you will get outbid.

Once a property falls out of contract, it can be a good moment to get your offer accepted by default. I guess what I'm saying is that if at first you don't succeed, try and try again, but also nothing ventured nothing gained.

Work with an agent and a lender who doesn't mind doing the more challenging work that is sometimes involved in these types of properties.
I hope that helps!
0 votes
Jay Taylor, , Santa Ana, CA
Mon Sep 2, 2013
If you think that there is a problem in the pipes and they have frozen then you can contact any HVAC specialist and let them have an inspection of your house. They will surely tell you what the problem is. Do not think or do without any expert advice.
All the best..!!
0 votes
Mikel DeFran…, Agent, Canton, MA
Sun Sep 1, 2013
I just received approval on just such a home - short sale not bank owned - but similar situation. The seller had not put oil in the tank and the radiators burst. It is being financed with a 203K loan. So these types of properties CAN be financed but its' a long and difficult loan process, costs are higher, turn times longer, need estimates from a contractor or contractors ( depending on the $$ amount ) etc. You would need an agent and especially a lender versed in such programs.

I am curious... when you say the " Seller " to whom are you referring? Most bank owned's I do would never dare make any such representations. The condition of the property and accepting it as-is is purely the responsibility of the buyer. One of the challenges ( and hence the opportunity ) of bank owneds.
0 votes
Betsy Wilson, Agent, Natick, MA
Thu Sep 6, 2012
If you are looking at homes to buy, it is best if you are already working with a lender and have been pre-approved with that lender. I would present this question to them to see if they would approve the loan given the circumstances. Each lender is different, just because one lender won't approve the loan doesn't mean they all feel the same way. I would be glad to recommend a lender if your not already working with one. Feel free to contact me if you need additional information.
0 votes
Donna Stetson…, Agent, Framingham, MA
Wed Sep 5, 2012
Someone will come along with cash. There are construction loans but they are harder to get. If you really like the home call a few mortgage agents and ask if there are any possibilities.
0 votes
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