We are FHA and we're just "surprised" yesterday with the inspection

Asked by K. Owen, Holmesburg, Philadelphia, PA Tue Feb 28, 2012

The seller never mentioned it, neither our broker. From what research I've done as long as your not careless it's completely safe. I think we may have to have that being updated to the Agreement. Inspector said it was only in second floor, and most houses (Northeast Phila.) all have that built before WWII. The biggest issue, we budgeted to our estimated cost sheet which I hope now isn't effected greatly. Would it be wiser to ask for the money to the work with the agreement, we're stuck in a fast settlement and really stuck now, if we have 80-90 year old wiring?

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John Leonard’s answer
John Leonard, Agent, West Chester, PA
Tue Feb 28, 2012
Dear Mr. or Ms Owen,

Have your lender clarify what you mean by "inspection". Probably it was the appraisal of the home, which with an FHA loan is more than just an assessment of value, but also an assessment of safety. Even homes that just in need "a little love" will often have repairs mandated by the FHA appraiser.

You must understand a few things:

a. This is a loan requirment. the appraiser has a list of conditions to "check on" and few exceed that list, but
most will identify and require repair of any repairs needed from that list. most common is peeling paint.

b. Repairs must be done BEFORE SETTLEMENT and verified by the same appraiser, or the loan won't fund.
. Your willingness to accept the condition(s) does not matter. BEFORE settlement or no loan.

c. Most experienced appraisers working the large parts of are area filled with 60-100 year old homes excersize
a level of common sense or else large parts of the area would have trouble selling, Most of our
grandparents can't lean out a 3rd story window to paint window sashes anymore, for instance.

the good news....this is the sellers repair problem, though it may be a "time problem" for you if the agents, seller and you do not manage it carefully.

first thing you do....get the appraisal report or a verbal of any repairs. there may be NO repairs needed.

if there are, your agent should speak to the other agent and lay this out. Frankly the agents, unless they both got licensed last month, and this is the first transaction for each of them, BOTH should be well aware of everything written here....should follow this plan.

1. seller fix the stuff (if any) that is identified. we cannot close until you do and until the appraiser reinspects

YOU THE BUYER should not spend one cent or five minutes repairing somebody else's home before you own the home. if the agreement falls apart, you won't get the time or money back.

2. if the seller is unable or unwilling.... and you feel you are getting only an average deal at best, the agreement should terminate based on the mortgage contingency, witth you getting back your deposit monies

seller cannot "just sell to someone else" - at least no other fha buyer, becaseu once an FHA appraisal is done on a property, it stands for 6 months. so if your home is in a price range or area where more than half the buyers are FHA buyers, then.... effectively the seller has to face the music and do these repairs - or sell for 60-70% of fair market value to a cash investor. which is probably worse than painting for you.

if the house is vacant. if you feel you are getting a great deal. MAYBE you do the work. but that is not advised and financially risky to you, because if you don't settle, you are out that money and effort.

sorry to ramble. your agent should have explained all of this, and maybe they did, and you didn't really hear or understand. this is NORMAL for FHA loans. it may push back your settlement date.

Good luck

John Leonard
Long & Foster Real Estate
610-742-9389
john.leonard@lnf.com
3 votes
Ana Barlow, Agent, Philadadelphia, PA
Tue Feb 28, 2012
Dear K.Owen,

I would recommend that you take a couple of hours and sit down with your agent and go over the entire contract piece by piece. Take notes, explore each of your options at this juncture. You can also speak to your mortgage broker to get specific details regarding an FHA loan and all of the details that affect your options.

A general overview of the steps for a Pa. AOS with an FHA loan is for the offer to be written and then accepted. The buyer has a home inspection and the issues that the home inspector finds are then negotiated between the two sides - the seller may agree to do some work or provide money if it is permitted for the buyer to take care of things. Many other steps pertaining to contingencies follow, but shortly after the loan application is made the mortgage people send out an appraiser. This appraisal is different than the inspection and it is the point at which the mortgage co. decides if the property meets the standards required for loaning the money for a mortgage. - Think of it this way, your teenage son wants to borrow money from you to buy a car, would you just hand him the 5,ooo, or would you want to take a look at where your cash is going? Anytime you invest in something it is prudent to see if that "something" is of good quality. The mortgage company has certain standards in place when funding an FHA and they are meeting those standards.

You should meet with your agent, and if they cannot answer your questions, meet with his or her broker of record. You should be able to get numbers and you may still have time to decide if this is or is not the house for you. The mortgage company may not fund the loan for this particular property if the upgrades are not done and the house is not up to FHA standards. The property will need to be reinspected before the loan with be approved and you can obtain mortgage commitment / which is one of the necessary contingencies you must meet as a buyer.

In the event the seller will not make the repairs required by the mortgage appraisers report based upon FHA standards, this property may not qualify for an FHA mortgage, and you may not be bound to purchase the property. That being said, it may be in the sellers best interest to make the repairs - an FHA appraisal report "stays" on record with a property for six months, meaning that unless a different buyer has cash or conventional financing (traditional 20% down) this seller will be stuck with the same issue for the next six months with any and all FHA buyers - and there are many many FHA buyers.

1. Meet with you agent
2. Find out your 2 or 3 options
3. Make an educated decision

Ana Barlow, Coldwell Banker Preferred
anabarlow@gmail.com
Web Reference:  http://www.anabarlow.com
1 vote
Bruce Lang, Agent, Philadelphia, PA
Wed Feb 29, 2012
consult with your agent, lender and attorney. usually things can be worked out.
0 votes
John Leonard, Agent, West Chester, PA
Wed Feb 29, 2012
K,

Do not panic. this is likely to be ok for you, even if you may need to do some scambling

Adding to yesterday. GET THE APPRAISAL. there may be no repairs at all. Unless the wiring is exposed, i really doubt replacement of knob & tube or old cloth wiring is going to be mandated.

IF THERE ARE repairs. As others and myself have said....this is the sellers problem to pay for. If they can't or won't then you may exit the agremeent and get your deposit money back. If these repairs are simple things, the seller should do them because most affordable areas of the city are being purchased with FHA loans. so anything your appraiser calls for is 80-90% likely to be needed for the "next" owner occupant buyer.

if you nervous about "old wiring" now that this has come up... An electrician cited an opinion that i would be comfortable standing by, though i am not an electrician.
0 votes
Stephen Conn…, Agent, Birmingham, MI
Wed Feb 29, 2012
K,
As an electrician , I can tell you that this wiring is considered safe. I do not even know if it can be considered an item that you may ask for repair $ or will allow you out of the contract. If you need additional plugs or lights, you may have to run new wire. At this time you may replace the old wiring. Ask your Realtor (buyers agent I hope) what they suggest.
0 votes
Jim Simms, Mortgage Broker Or Lender, Louisville, KY
Tue Feb 28, 2012
The seller can’t give you money to complete the work after the sale is closed. And do not try to hide such an arrangement from the lender, someone goes to jail every day for stuff like that. The seller can lower the purchase price but that doesn’t improve the cash available to fix the problem. The best way is for the seller to fix the problem before closing. Good luck, hope it works out for you.
0 votes
Alan May, Agent, Evanston, IL
Tue Feb 28, 2012
Your Realtor and/or your lender should have advised you (in advance) that FHA does it's own appraisal/inspection. Typically, health and safety violations that they find must be repaired prior to occupancy, and they often don't allow the buyer to pay for them.

Talk to your Realtor and/or your lender to fill you in on the details.
0 votes
Philip J. Cu…, Agent, Feasterville, PA
Tue Feb 28, 2012
The person you need to discuss this with is you Agent and mortgage Representative they are the ones that have all the facts. Simply put NO AGENT can advise you without ALL the facts so you need to talk with your Agent and not an advise site.

Philip J. Cunningham Sr
V.I.P. Realty Corp
7942 Bustleton Ave
Philadelphia,PA 19152
215-725-5700X49
Philip J. Cunningham Sr
V.I.P. Realty Corp
7942 Bustleton Ave
Philadelphia,PA 19152
215-725-5700X49
Web Reference:  http://www.GreatPaRE.com
0 votes
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