Are you putting off selling your home because you feel overwhelmed with the required repairs? Or are you interested in buying a house and are concerned about dealing with lender required repairs? Regardless if you’re the seller or buyer, hiring the contractors and supervising the work as part of lender required repairs can be a lot of work not to mention expense.
Here’s what you need to know about lender required repairs, what lenders are looking for, and how to avoid the most common issues.
What Are Lender Required Repairs for the Seller?
Many lenders require repairs before approving a home loan which are termed lender required repairs. They are essential to protect the health and safety of the people that will inhabit the property.
Private banks and credit unions may suggest repairs. On the other hand, government loans such as the FHA loan, require repairs. Lender required repairs are repairs, that by law, must be completed before home loan approval.
Buyers’ homes must meet required standards to secure government funding, such as Federal Housing Administration loans. Meeting these standards often requires making specific repairs.
Home Inspection: Who Inspects the Property?
A government lending agency doesn’t inspect houses. Mortgage lenders contract with appraisers and a home inspector to evaluate real estate to ensure that the home is in optimal conditions.
During the appraisals, the professionals will use Federal Housing Administration requirements to see if a property meets government standards and conditions. If it doesn’t, the homeowner needs to make lender required repairs.
The Repair Requirements by the FHA for a Mortgage Loan
You need to make sure the house is beautiful and functional. This goes beyond repairing the peeling paint on the walls. The Federal Housing Administration’s required repairs list isn’t a short one! From foundation problems and defective fire alarms to other issues, here is what you need to know.
The following are some common issues that the FHA requires to be addressed before they will approve a home loan.
Over the Line
This refers to any part of a house that stands on or touches a neighboring lot. This is a problem for lenders and they won’t allow insurance on an encroaching property as this condition diminishes the safety and value of the house.
If a house’s roof is missing shingles or sagging, you won’t get a loan approved for the property. If a fix is feasible, get a quote on it. Depending on the level of damage, you may even need to opt for a full roof replacement.
While you might be able to overlook some peeling or cracked paint and plan to repaint the area after you buy the house, the FHA requires that it’s addressed before they will approve a home loan.
Lights operated by pull chains need to be replaced with switches. Any two-pronged outlets should be replaced and updated with three-prong outlets known as grounding receptacles. Any exposed wiring or outdated fuse boxes fall in the list of required repairs and hence you will have to attend to these issues promptly.
If an appraiser finds a red flag in your home’s foundation, it needs to be fixed. Water damage or excess moisture are common culprits.
Any stairs without handrails need them added. Any unsecured handrails need to be fixed. The appraiser will flag handrail issues as safety hazards and the lender won’t be able to approve your loan so you need to fix these safety issues
Having a hood above your stove doesn’t necessarily mean it’s properly vented. Where does the air vent out? Inadequate kitchen stove venting is a common FHA lender required repair. A property inspector will check this carefully and a black mark on the appraisal report is bad for you.
All utilities must be in working order for any lender to approve a property loan. Multi-unit properties need separate working utilities for FHA lender approval. Basic utilities in your property include water, sewer, gas, and water heater. Ensure that each utility is in top condition to increase your chances of getting the mortgage loan.
Each bedroom needs a window big enough to escape a fire. Basement bedrooms need egress windows. Homeowners can get around this by referring to non-code window rooms as offices.
To qualify as a bedroom, window size(s) must be adequate. This is one of the most important lender-required repairs to get FHA loans because they are essential for safety.
Any rotting exterior will not pass an FHA appraisal. This includes siding, trim, doors, decks, or stairs. This is a required repair cost to gain an FHA lender approval. This also extends to equipment such as the water heater.
Lenders will refuse to approve a loan because rotten materials inside the property can be damaging for health. They can be host to dangerous elements such as mold.
Who Pays for the Required Repairs After Appraisal?
Payment for lender required repairs depends on a few things. Here’s a look at a few common scenarios.
1. The Seller Pays
Most purchase agreements have an allowance for repairs. For example, the seller agrees to cover the required repair costs up to a certain amount. Responsibility for any amount above the agreed-upon costs falls on the buyer.
If the purchaser is unable or unwilling to pay for lender required repairs, the sale could fall through. In this case, it’s often in the best interest of the seller to cover costs in order to close the sale.
2. The Buyer Pays
If a property has been in a bidding war, buyers may be motivated to pay for required repair costs. In this instance, buyers may want to pay for lender required repairs to keep from losing the sale.
3. Buyer and Seller Pay
After buyers request FHA required repairs, sellers may meet them halfway. In this instance, an addendum will be added to the purchase agreement. Both parties must sign a document detailing who pays for certain portions of the appraisal repairs.
How to Avoid Paying for Required Repairs and Lenders
If paying for lender required repairs stresses you out, there are other options. By selling your property to a cash buyer, you can avoid loan approval woes altogether. Buyer and seller can complete the transaction quickly without realtors.
Here’s how it works: A cash home buyer will offer you cash for your property. Since the buyer doesn’t need to take out a loan, there’s no lender approval required and thus no lender required repairs, and you can even get an earnest money deposit.
Most cash buyers will take your property in as-is condition. Selling your house as-is means you don’t have to make any repairs. Forget about the conditions of your property, real estate agents, repairs and simply sell it for a fair cash offer.
How to Sell Your House with a Cash Buyer without Realtors and Lenders?
You’ve probably seen signs advertising “we buy houses for cash”. Real estate investors often buy homes that need work – a quick home purchase for their clients.
By selling your house to a cash home buyer, the process can be completed in a matter of days and you will receive cash in your account.
When a cash home buyer makes an offer on your property regardless of its condition, it will be around 70% of your property value according to the MLS list price. Before you turn up your nose at an offer, consider the cost of listing your home through a realtor–the commission, fees, the waiting period, and the money you’d have to spend on making repairs and improvements.
Sell your home to Move On Cash Buyers to forget about repairs and simply get the money in your pocket so you can move on.