Inspection on Foreclosure (incentive, appraisal, clause, agent)

[ilikepizza]

After having the inspection on a foreclosure we found the AC unit not to be working. What are the chances of Fannie Mae fixing it or replacing it?

[2bindenver]

zilch. But at least you know what you are buying.

[ilikepizza]

Would we be able to break the contract because of it and get our earnest money back?

[Racelady88]

Is it a central A/C unit that also provides heat? If so, and you are located in a part of the country that working heat is a requirement you may (or may not) be able to get them to replace it. Even if the property is advertised "As Is" there is still a chance they will repair/replace the unit.

If this were me, I would ask them and see what they say. Make sure you are within the inspection period, and request an extension of that period until you get their answer. If they say no, then you decide if you want to cancel the contract due to an unfavorable inspection.

[2bindenver]

That would depend on your contract. Didn't you know that this property was not in perfect working order when you placed your offer?

If I was representing you, and I am not. I would ask you to consider a few factors:

A foreclosure is a generally good deal because the sales price is less than fair market value. Do you know much it would cost to repair? What if it's $400? What would a new energy efficient model (may come with a tax rebate) cost.

Since it's a Fannie property are you getting the 3.5% or new appliances as an incentive?

Are there houses for the same price in better condition available?

Would it be possible to get an estimate for the repair and roll that into your mortgage? That would depend on the appraisal.

Are you represented?

It seems to me that just the a/c needing fixed is not a good reason to walk away.

[ilikepizza]

They didn't turn on the utilities until halfway through the inspection period. We got an inspection the last day of the period and I informed my realtor the ac wasn't working. She told the listing agent about the ac on the last day of the inspection period. The listing agent hasn't said whether it would get fixed or not. Still waiting to hear the results.
We live in the south so don't think heat is a requirement. We haven't had the appraisal yet. Does the appraiser take into consideration broken ac units?

[ilikepizza]

Yes I knew the property wasn't in perfect condition but there was no way to tell if the ac was working as the utilities were off when we saw the house.
Not sure how much it will cost to repair. We are getting 3.5% toward closing but I think because of our lender they will only allow us to receive 3%. Maybe they could let us use the left over .5% toward the ac??
There are a lot of houses around in better condition in different neighborhoods.
Yes we are represented.

[TempesT68]

It's highly unlikely they will fix it, but being a foreclosure i'm sure the price is already well below market and that 2-3K for a new AC i'd assume house is still at a great price.

[Silverfall]

I have yet to see a Fannie or Freddie home here that isn't a good deal. They won't fix it. They will fix things for FHA or VA financing, but a working AC unit isn't a requirement for either of those loans. Heat yes, AC no.

Out here you'd be buying a house with a broken AC unit, but no one on this forum has any idea of the contract you signed. Whether or not you can back out of the contract and get your earnest money back depends on what your contract says. If you don't understand what you signed, then you need to call an attorney to help you understand the clauses in the contract.

[ilikepizza]

Thanks for all the info.
I think I would be able to get the money back,as we did the inspection within the 10 day frame and my real estate agent informed the listing agent about the AC. Being a holiday wknd I'm guessing I won't hear anything until Tuesday. My biggest worry would be moving into a house in the middle of summer, in Texas, with no AC and having to dish out thousands to get it replaced.