If I receive an offer from a buyer with FHA financing, what do I need to know before accepting the offer?

Asked by J, 74037 Fri Mar 20, 2009

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Jennifer Bla…, Agent, Owasso, OK
Fri Mar 20, 2009
Know that the appraiser will have more strict standards than a conventional loan and that if the appraisal says that repairs are needed, you as the seller will have to make those repairs before the bank will finance the loan. In a conventional loan, the appraisal might take repairs into consideration for price but you have more room for negotiation on price. For instance if the appraisal says the roof needs to be replaced which could cost close to $8000.... in a conventional loan, you could change the purchase price to $92,000 and leave the roof... in an FHA loan, the roof HAS to be repaired before the sale/close of the home and the lender will not allow the buyer to purchase it for more than the appraisal.
1 vote
Julie Miller, , Parkesburg, PA
Wed Mar 25, 2009
It may help to have your home pre-inspected before accepting FHA financed buyers. In the long run this will save you time and money. The cost for this is anywhere between $200-$350. In my opinion, well worth it!
0 votes
Lisa Manley-…, Agent, Bixby, OK
Wed Mar 25, 2009
FHA standards for underwriting keep changing. Years back, it was really difficult to go FHA due to their high standards (pickiness). Six months or so ago, it seemed that it was quite a bit easier to get the financing due to relaxed standards. The market has recently changed a bit due to the credit/ lending/ mortgage mess, in that FHA has been focusing more on safety issues, ie. bannisters that are loose, steps that are uneven--electrical issues in older homes--various issues that are a safety hazard. That is the latest and you can expect things to change in our ever changing market. That said, if the home is in pretty decent shape, you can welcome an offer with FHA financing because it is likely to get to the closing table.
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Tim Epps, , Tulsa, OK
Sun Mar 22, 2009

Jennifer is correct about the FHA appraisal being more strict, but it is not severely so. An appraiser's primary job is to evaluate what a knowledgable, willing seller and a knowledgable, willing buyer would agree upon for a price when both are acting in their own best interest.

His evaluation of the soundness of the property (beyond its effect on value) is limted to obviously apparent issues. In other words, the appraiser will likely not concern himself with structural issues unless he sees obvious deficiencies that would lead him to do so. Have a lot of large cracks in drywall or exterior walls? Expect him to report that there may be structural concerns. He is not an engineer, plumber, electrician, heat & air expert, etc. and will not pretend to be.

Overall, you should not have much concern with a buyer using FHA over a conventional loan. In fact, with the state of underwriting and the difficulty of obtaining mortgage insurance today, it could be said that a buyer that is using FHA financing is more assured of closing than one with conventional financing and less than 20% down.

If you have any specific concern not yet addressed, do not hesitate to ask.

Tim Epps
Fairway Independent Mortgage - Tulsa
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