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Old 05-07-2010, 08:53 PM
Location: alabama
11 posts, read 57,850 times
Reputation: 12


I am a confused first-time-home buyer who rushed into contract (to meet the tax credit deadline) with a foreclosed home owned by an out-of-state bank.

In order to be approved for the loan, the house MUST pass an appraisal. I was told by my lender, "The house must be move-in ready (ex: water stains, roof damage)." I have to pay for the repairs of a house a may not get in the end!

I need to know what is needed to pass an appraisal.

I have listed the repairs I see needed. Please let me know which ones need to be done.

1.Two missing roof shingles
2. 2-3 water stained tiles
3. Small hole in masonite (siding) causing leak n garage
4. Small roof area (flat-top) needs new roofing
5. Pilot light line leaks (broken) (gas stove
6. Kitchen door casing rotten in one area
7. Leaking/busted pipes (3 – under bathroom sink, garage, ice maker) (all easily fixable)
8. Basement – dirt has washed in behind the dry-wall of a small area (busted through)
9. Basement – missing tiles (thinking of coving with plastic b/c it’s an insulation issue)
10. Basement – mold on sheetrock walls (some idiot put sheet rock in a damp basement attempting to make a cheaply done hang-out room)
11. Door that leads to basement from kitchen is not solid (decorative metal design) – problem: moldy basement is not closed off from the main house.

(just number 1-11 and inform me if you think it is needed for the appraisal or not)

Also, any ADVICE?????

THANKS SO VERY MUCH!!!! I love this house... I want it soooooo badly!
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Old 05-07-2010, 09:14 PM
482 posts, read 773,194 times
Reputation: 192
What type of loan program? Conventional, FHA, Rural Development, or VA? That'll have a ton to do with how easily the home will make it past any appraiser issues. From my experience, the most difficult in order of most to least:

1. Rural Dev
3. Conventional
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Old 05-07-2010, 09:19 PM
Location: alabama
11 posts, read 57,850 times
Reputation: 12

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Old 05-08-2010, 05:16 AM
Location: alabama
11 posts, read 57,850 times
Reputation: 12
oh... add 12. chipped paint on a small amount of the exposed exterior eaves
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Old 05-08-2010, 05:18 AM
Location: Madison, AL
3,042 posts, read 4,011,861 times
Reputation: 2339
First, you need to talk with your bank.

Second, you need to go back to the seller and state what has to be done in order for the lender to lend the money, then either force THEIR hand to make the repairs, or you could take a seller's concession on price.

I have a foreclosure (horrible shape, it is an investment property) and the appraisal just came in low due to necessary repairs, but we are negotiating a $15k price reduction, which will put us well below appraisal. My client's lender also wants "some" assurance the major repairs (which in this case, the roof) the work will be completed, so we are providing them with the contractor bids.

You may love this house, BUT you need to make sure you are making a sound investment. It also seems that your lender is being a bit "nit picky", as I have commonly had lenders come back for big ticket items, but 2-3 water stained tiles and a couple of missing roof shingles? That is uncommon on conventional, now NOT FHA or VA.

You have an opportunity to force the bank into some concessions to get the transaction completed. Believe me, most of them will bite the bullet to make the deal work. The bank I am dealing with won't do the repairs, but "would be open to a price reduction" even though, in the bank addendums, it states as is. You need to probably start by getting a contractor's bid in writing for the repairs, to submit to the bank to justify the repairs/price reduction. In the end, it is a business transaction, and the bank is very aware that if there are appraisal issues on this transaction, more than likely they will come up again, especially if you are going conventional.

You also really never need to rush into a foreclosure, and always need an agent who is very experienced in selling foreclosures and dealing with the bank addendums. It's a whole different ballgame, and there are very important legal issues you need to know and understand (beyond the right of redemption) before jumping into one.

The moldy basement would be what I would be most concerned about....that is NOT a cheap nor easy repair, and it is very important that you rectify that, or you will have an out of control mold issue on your hands, which is not safe.
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Old 05-08-2010, 05:28 AM
Location: alabama
11 posts, read 57,850 times
Reputation: 12
Two years ago the house was appraised for $149,000.

I agreed to pay $87,000 (also bank/seller pays part of closing cost).

....how does this factor in?

...should I seek out another lender?
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Old 05-08-2010, 05:48 AM
Location: Madison, AL
3,042 posts, read 4,011,861 times
Reputation: 2339
It does not matter what that house appraised for two years ago. All that matters is the here and now.

And, at this stage in the game, seeking out a new lender is going to mean another appraisal (but you will still have to pay for the first one, and then a new one with the other lender). Used to, the lenders would "sometimes" accept the appraisal that was done with a prior lender, but that trend has pretty much screeched to a halt. I would expect a new lender will require that they order a new appraisal. The appraisal world is WILD right now, with appraisers coming into the area from all over, even as far away as ATL. A new appraisal could go better for you, or it could swing worse. It is like a crap shoot.

If I were you, I would play hardball with the bank and try to get them to make some repairs or do a price reduction...again, I know you LOVE this property, but business is business. They want to sell this property, and these issues are more than likely not going to go away with your deal, so they usually will do what is necessary to make the contract they have in hand work. A bird in the hand, is worth two in the bush, you know.

In that price range, most buyers will be using FHA right now, not conventional, so the bank has to realize if they are having issues getting the home to pass a conventional appraisal, they are NEVER going to get it past FHA or VA. Rural Development follows FHA guidelines and uses FHA appraisals.

Sadly, there have been ALOT of buyers who made snap decisions due to the expiration of the tax credit. I had several wanting to rush into deals, and I had to counsel them to think what they were doing through...because sometimes a snap decision can cost you much more than $8k. I have one I am very concerned about...I really advised them to not jump into this property, but they want that tax credit money and wanted to go forward immediately.

There is a process that I start with my buyers who are considering buying a foreclosed property, and that starts with the buyer calling either Mike Brodowski/Joel Sullivan, or Bo Harrison. All are real estate attorneys who are very experienced in foreclosed properties, and are more than happy to explain all the legalities involved in a foreclosure. I always close my foreclosed properties with Mike Brodowski, Joel usually handles the closing, and he will scare the pants off of you telling you about the risks involved with buying foreclosed properties. On the majority of foreclosures, Sirote out of Bham handles the titlework and represents the bank, and just having to deal with them is a tremendous headache, and justifies another 10% off the market value!

Last edited by LCTMadison; 05-08-2010 at 06:27 AM.. Reason: add. info
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Old 05-08-2010, 06:44 AM
Location: alabama
11 posts, read 57,850 times
Reputation: 12
hmmmm... sure wish the realtor (representing the foreclosed home) had informed me of the appraisal requirements before I signed the contract.

When my lender informed me of the requirements, I asked him about it and he (the realtor) had no idea about it! I don't think this is normal. Shouldn't he know these things?

also... THANK YOU FOR YOUR RESPONSES! The information is extremely helpful and giving me direction!
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Old 05-08-2010, 06:55 AM
268 posts, read 538,509 times
Reputation: 422
You need your OWN realtor working for you ! Not the property's realtor !
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Old 05-08-2010, 07:00 AM
Location: Madison, AL
3,042 posts, read 4,011,861 times
Reputation: 2339
Yeah, that Realtor represents the bank, not you. He/she is required by law to work to your detriment.

And no, there are lots of Realtors who are completely clueless about lender requirements, appraisals, ect. But even if he did, it is not his job to advise you....he actually CANNOT advise you at all.

And I just noticed your post about the chipped paint...that is very common with FHA, but I have NEVER seen that come up on conventional. Ever.

Chipping paint is not necessarily a repair, but under FHA/VA guidelines, it must be removed.
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