In contract for home damaged by Sandy. No structural damage. Lower level needs walls & flooring. Subflooring OK. Lender won't fund unless fixed. Help

Asked by Kgrems, Freeport, NY Tue Apr 16, 2013

Home sold "as is" and the price reflects this. Bank waits almost a month after appraisal report to tell us this. Meanwhile got insurance, etc. What can we do?

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Javier Menes…, Mortgage Broker Or Lender, Melville, NY
Tue Apr 16, 2013
The problem was communication and your Loan Officer made a critical mistake. Assuming that you're doing a conventional loan, your Loan Officer should have known that this was going to be required in order to close. So now you're in a jam. Your bank probably issued a commitment that might have been sent to the seller, and that could be a problem.

What was supposed to happen was that your Loan Officer was supposed to review the appraisal or, in fact, a simple conversation with yourself or the Realtors involved could have given the Loan Officer an idea of this issue and he/she right away should have informed you that you needed to do a 203(k) in order to get this loan.

What few banks are willing to do, including mine, is to possibly hold funds in escrow for you to do the work after closing. Try asking your current lender or consider another lender who can quickly get you to a closing table.

Feel free to contact me if you have any questions or want a 2nd opinion. Good luck!

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Javier Meneses
Senior Loan Officer
NMLS #23130
310 Crossways Park Drive
Woodbury, NY 11797
(516) 606-9648
0 votes
Also, I'm sorry I missed the holding funds in escrow part. Let me talk to my husband. It's a great house, and I feel it slipping away due to the inadequate job from loan officer.
Flag Tue Apr 16, 2013
Thank you Javier. The loan officer was a problem from day 1 unfortunately. Manager had to get involved several times. I don't think the commitment was sent to the seller, but will find out. Does your bank do these 203(d) loans?
Flag Tue Apr 16, 2013
Tony Grech, Mortgage Broker Or Lender, Southfield, MI
Tue Apr 16, 2013
After Sandy, many lenders put additional requirements in place on areas affected by the storm to protect against lending on properties requiring extensive repairs.

The bad news is that there are likely going to be delays in getting you closed. Lenders don't normally fund conventional or regular FHA loans on homes withough walls or flooring so you will need to get a different type of loan. The good news is that the seller is going to run into these issues with selling the home to anyone, unless they put the house back on the market and find a cash buyer - who by the way will only offer them a super lowball deal. So my point is the seller should be willing to work with you if you have a good realtor to negotiate things for you.

As stated below, if the seller won't fix these items then you will probably have to do an FHA rehabilitation loan, known as a 203k. These loans have different requirements and not everybody does them, but if your current lender doesnt then you should find a lender that specializes in them. Don't get caught up in rate shopping. The most important thing is locating a lender with expertise in the area, because having a good pilot on this is essential. Otherwise it can take forever to close.

Hope this helps. Best of luck to you
1 vote
Thank you Tony. Property does not need extensive repairs. The lower level could be described as a basement (although it is not below grade) or even a playroom with a few rooms. Seller has new burner and hot water heater. Will check 203k. Thanks again!
Flag Tue Apr 16, 2013
Anna M Brocco, Agent, Williston Park, NY
Tue Apr 16, 2013
You really should be discussing your options with your attorney; also what is your loan officer suggesting, is a 203K rehab loan a possibility....
1 vote
John Roberts, Other Pro, Island Park, NY
Fri Apr 19, 2013
I just bought a home in a similar circumstance. I went to contract, my bank would not lend to a damaged place. I then went back to seller asked for money off house to do a cash deal and waive mortgage contingency clause.

Which he did, so now I am closing very soon at a great price.

Most people don't realize you can get a mortgage after you close within a set time period and still be treated as a normal loan that is fully deductible. Or you can do a HELOC vs your primary, a margin loan, 401k loan, bridge loan or bank of Mom and Dad. Or maybe you just have money sitting in bank earning zero.

The amount you can get off to do a "cash" deal even if you are getting a mortgage after closing is worth it.

I got six years worth of the mortgage deduction in a discount for cash plus saved around 4k in closing costs. With Stocks and bonds at highs and banks paying near zero cash is becoming popular.
0 votes
Thomas Brady, Agent, Plainview, NY
Tue Apr 16, 2013
As Anna stated your attorney could advise on contract issues. Also the rehab loan may be the only way to go, speak with your lender to see what options he can offer in that area. Good luck.

Licensed Real Estate Salesperson
Notary Public, Retired N.Y.P.D. Lt.
#1 Listing & Selling Office on Long Island
Charles Rutenberg Realty, Inc.
255 Executive Drive - Suite 104
Plainview, New York 11803
0 votes
Tim Moore, Agent, Kitty Hawk, NC
Tue Apr 16, 2013
This is often a catch 22 that needs to be worked out. There is no easy answer and someone has to give in or it can't work. Good luck.
0 votes
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