Can a seller sell a house to a FHA buyer ASIS with violations and encumbrances?

Asked by Zyxwvutsrqpon, 11210 Fri Mar 23, 2012

I have a house for sale. I advertised it as a fixer-upper and was selling it in AS IS condition. The buyer has secured a FHA and ask that I remove all violations and encumbrances in order for the sale to go through. I do not agree with the FHA requirements as I want to sell the property AS IS with violations and not have any of my money held in escrow after the sale,

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Michael Emery, , Minneapolis, MN
Fri Mar 23, 2012
They shouldn't have bothered placing an offer on an 'As Is' property unless they were willing to do a FHA 203k fix up loan. If they're going with the straight FHA loan, it sounds like they won't be able to get past appraisal.

It's a shame they (and / or their agent) wasted your time. Any competent agent would've steered them away from a property that knowingly wouldn't pass FHA muster.

If they want it, tell them to get an FHA 203k loan or request a mutual cancellation of the purchase agreement.
1 vote
April Rager, Agent, Clermont, FL
Tue Mar 27, 2012
Wow, this seems to be Ground Hog Day!! This comes up over and over and over. I see it with buyers all the time. In the Central Florida area, there is a lack of inventory right now. That makes it difficult to find a home at all, let alone one that doesn't need some repairs or concessions. Even with As-Is homes, the buyers still ask for repair concessions (sometimes).

It's not an easy time to sell and everyone has to compromise. Some more than others, of course. But if you are specific, as you seem to be, then that was really a huge waste of time for you and them.

I hope that you are able to get a new buyer quickly!! Good luck!
0 votes
Mitchell Fel…, Agent, Brooklyn, NY
Sat Mar 24, 2012
Dear Zyxwvutsrqpon:

If you are already in contract and the FHA is requesting repairs, the buyers will not be given a loan unless the repairs are done. You are not obligated to make the repairs, but if you do not the deal will falter.

With regard to the violations, even if the loan is not an FHA, most mortgage bankers will still require that violations get addressed and/or money be held in escrow in order to close. The only way you know for sure that stuff will not be a problem is if you find an all cash buyer.

If you are still trying to sell the property I would like to find out more about it. I may even have a good buyer for you. Feel free to call me anytime and good luck!

Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
0 votes
Pacita Dimac…, Agent, Oakland, CA
Sat Mar 24, 2012
In the contract, did the buyer state he was getting an FHA loan because that would have been the dead giveaway as to what challenges you may face as a seller. From the get-go, and as you say your property is a fixer and couldn't possibly have been approved for a regular FHA loan, then tell the buyer and his agent to find a lender who can qualify the buyer to get an FHA 203K loan.

It is your right to sell you property AS IS. If he wants to buy it, he'll find a way.

But if he balks, then you both have enough reason to cancel the agreement. And you can move on.

As a selling feature, why don't you partner with a lender who CAN offer this type of loan, and have him print some flyers he and you can use to market your property as eligible for FHA 203K loan.

Good luck
0 votes
Alma Kee, Agent, Tampa, FL
Sat Mar 24, 2012
Some really good suggestions already.

What does your Realtor suggest? If you're not being assisted by a Realtor then you may need to hire an attorney to review the terms of your contract to verify whether or not you olbigated yourself to making those functional repairs.

If your contract doesn't require you to make repairs, then simply have your agent tell the buyer's Realtor that the buyer must change their FHA mortgage to a 203K Streamline (if under $35k and no structural repairs) mortgage. Then the "buyer" pays. The buyer can also have other "upgrades" added like painting, new roof, new flooring, new kitchen cabinets, etc, too. They can end up with a "model" home and not have to lift a finger other than deciding if HomeDepot or Lowes will be the general contractor to oversee the repairs. Be prepared to have a delayed closing as 203K Streamlines take about 60 days to close.

All the best,
Alma Kee
0 votes
Fajardo Dela…, Agent, Flushing, NY
Sat Mar 24, 2012
The answer is that it will be hard to get a loan.When the appraisal is done and the bank see it, the buyer will most likly will be turn down. In actuality, an FHA appraisal is for the lender, not the borrower. They do not guarantee anything and they will not buy the home back from you if you find a problem after closing. If you need or has any further questions please feel free to call me. Fajardo (347) 932-0609
0 votes
Jack Menashe, Agent, Brooklyn, NY
Sat Mar 24, 2012
In 11210 I have qualified cash buyers if the other suggestions don't pan out....


Jack Menashe
0 votes
Thomas Brady, Agent, Plainview, NY
Sat Mar 24, 2012
If you want to keep the buyer, have him apply for a rehab loan which would build the cost of fixing the violations into the mortgage. If you re-list it, make sure it is cash or rehab loan only to avoid the same scenario.
0 votes
Madeline Pad…, Agent, Brooklyn, NY
Sat Mar 24, 2012
Hi - I suggest you look for another buyer as far as I know the answer is NO your money will be
held in escrow. What has your attorney suggested. If you want to send me your address I
might have a buyer for you AS IS of course you might not like the offers you get.
0 votes
Anna M Brocco, Agent, Williston Park, NY
Sat Mar 24, 2012
Depending on the violations and encumbrances, not sure any lender will lend reagrdless FHA, or not; therefore you may be better off with a cash buyer, or consider cleaning up any issues.
0 votes
Luke Constan…, Agent, Brooklyn, NY
Sat Mar 24, 2012
You can sell your house "AS IS" if you would like to any cash buyer, but The Federal Housing Administration (FHA) has guidelines and rules when they lend money to a buyer. Certain violations on the home like plumbing, electrical and roof can stop the sale if the buyer has and FHA loan, but not a cash buyer.
0 votes
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