Should a Simple Repair Needed on a Property Kill a Deal?

    
Should a Simple Repair Needed
on a Property Kill a Deal?

     In quite a few of my recent Mortgage transactions, I've seen Appraisal Reports where the Appraiser has commented that the condition of the REO property (foreclosed) they are viewing has been "Less than ideal".  In each instance, the definition for "Less than ideal" has not been a true cause of concern in the Appraiser's eye.
 
     However, I have found each time that the Underwriter has seen this statement regarding property "blemishes" on the Appraisal Report as some sort of red flag.  Then the "blemish" has become an Underwriting issue.  This has been true even when the Contract and the Appraisal and the Listing all read ... "property to be Sold "As Is". 

     In each of these cases, property repairs were then either: A.  Required by Underwriting to be done ... or 
B.  The Appraiser was asked to submit further clarification on their "Less than ideal" comment. 

     The Underwriter wanted to know what the impact on value, safety, or marketability was for the "blemish" noted.

     The irony found in these scenarios is that there is a very likely chance that Fannie Mae, Freddie Mac, or FHA Insurance will be backing the new loan(s) and none would want the collateral to be what they consider "damaged property".  These situations have become a battle of wills.  Who is right?  Who is wrong?  What needs to occur so the transaction can move forward?

     Bottomline, each of the participants (Appraiser, Underwriter) have responsibilities within their jobs to fulfill, an important role to play in the transaction.  At the end of the day, the Underwriters are viewing this as the End-Lenders' and/or the Originating Lender's call to make.   
      The fact remains though, the property needs to sell.  The property needs to be liveable and financeable.  So, if the Loan Approval is contingent on fixing items, such as:


  • Holes in Walls or Ceilings
  • Exposed Electrical Wiring & Hanging Light Fixtures
  • Missing Handrails
  • Darkened, Discolored Drywall/Plaster/Foundations
  • Leaky Roofs
  • Rotted Wood
     then, who is responsible and performs property repairs before Closing?  Who steps-up to get the transaction rolling again?
 
     Legally, my Buyers do not have any rights to enter (or repair) the property.  The Seller in each case (or its designees or Asset Manager) has claimed they won't make the repairs.  That the property sold "as is".  Everyone involved in the transaction has been of the mind that Fannie Mae, Freddie Mac, FHA, Individual Banks ... none will make any repairs, either.
 
     So again, the simple fact remains ... if the repairs are not made, the Loan won't Close.  The property will go back on the market and the financial hole for the Seller deepens. 
 
     In one of the transactions I refer to, the repair on the "blemish" reported is estimated to be only $150 to $200.  There is a standoff taking place right now over this repair.  Should a Simple Repair Needed on a Property
Kill a Deal?  Will common sense prevail? 

     Stay tuned ...  
 
     Dreaming of Buying a Home or Refinancing in New Lenox, Will County, DuPage County, or elsewhere in the Chicago area?  Contact me today!  I'll put my 36 years of mortgage experience and expertise hard to work on your behalf.
     I can be easily found at the following:
Direct:  815.524.2280
Cell/Text:  708.921.6331
eFax:  815.524.2281
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