Lender is requring these repairs be made (loan, approved, foreclosed)
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Hello, I am very close to my closing date of August 7th of my new house in PA and the lender just sent me this email:
"Good afternoon xxxxx,
The appraisal came in and I got the loan back from underwriting as well. There are a couple of issues that need to be addressed. The appraiser indicates that there are repairs that will need to be made. There is no firewall between the ceiling of the garage and the living space above it that will need to be added and there is chipping and peeling paint that will need to be repainted on the garage door. Also the common walls to the basement need to be inspected for fire retardant materials. In addition to that we would need to have another appraisal done because of the dramatic increase in the value. That cost would be added to your closing costs."
I understand that the firewall is important in the garage but my inspector did not say anything about it which is making me a little uneasy.
The garage door is not that bad so can the lender require that.( I won’t mind but seems extreme) And how do I inspect if the materials in the basement are fire retardant?
On top of that I will have to pay another appraisal fee? I don’t think it will increase the value dramatically as she states but I could be wrong. This is my first time buying a home so I don't know if this is the "norm" but I think they are nitpicking a little bit. I am desperate for any advice.
Didn't you have a home inspection first? A good home inspector would have caught all of that earlier, and you could have made that a provision on the sale, that the seller fixes.
Our inspector even came out for the reinspection at a much lower fee since he had already been there and was only looking at the fixed items.
If this is a newly constructed home I have NEVER EVER heard of a lender that NEEDS additional items addressed AS LONG AS THE LOCAL AUTHORITIES HAVE ISSUED A CERTIFICATE OF OCCUPANCY! I have to admit that I do not know if every state / locality has similar policies but I would be shocked if they relied on LENDERS to enforce life/ safety / property loss issues like FIRE RETARDANCY!
If, (as I suspect is the case) this is an EXISTING home that has PEELING PAINT on a GARAGE DOOR ( big overhead thing that w/o the garage is basically a car port?!?) I can think of no good reason that ANYONE even FHA would really expect a seller to fix this.
WHAT THE HECK ARE YOU TALKING ABOUT when you say a "dramatic increase in value"?
Are you trying to borrow more money? Has this property been "flipped" or recently foreclosed? How could you be trying to use the appraisal from THAT event for your finance?
The way it generally works is the SELLER and the BUYER agree to a price that the BUYER has already been approved for. The lender then gets and appraisal to verify the property will be sufficient COLLATERAL for the mortgage.
Things in the OP's situation DO NOT SOUND LIKE THIS at all...
Location: Visitation between Wal-Mart & Home Depot
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Quote:
Originally Posted by yaaz786
Hello, I am very close to my closing date of August 7th of my new house in PA and the lender just sent me this email:
"Good afternoon xxxxx,
The appraisal came in and I got the loan back from underwriting as well. There are a couple of issues that need to be addressed. The appraiser indicates that there are repairs that will need to be made. There is no firewall between the ceiling of the garage and the living space above it that will need to be added and there is chipping and peeling paint that will need to be repainted on the garage door. Also the common walls to the basement need to be inspected for fire retardant materials. In addition to that we would need to have another appraisal done because of the dramatic increase in the value. That cost would be added to your closing costs."
I understand that the firewall is important in the garage but my inspector did not say anything about it which is making me a little uneasy.
The garage door is not that bad so can the lender require that.( I won’t mind but seems extreme) And how do I inspect if the materials in the basement are fire retardant?
On top of that I will have to pay another appraisal fee? I don’t think it will increase the value dramatically as she states but I could be wrong. This is my first time buying a home so I don't know if this is the "norm" but I think they are nitpicking a little bit. I am desperate for any advice.
Maybe you should try JW Financial Solutions - they'll save you.
Putting a firewall in the attic ceiling basically means that you need to hang sheetrock in there. It's a good idea whether or not the bank wants you to do it, but I've never heard of a bank dictating what repairs need to be made for a loan to be approved. I know that a lot of banks will not finance the purchase of a home with a foundation problem, but I wholeheartedly agree with Chett that this is a code enforcement issue, not a bank issue and, further, I can not imagine why an appraiser would be qualified to make those determinations on behalf of the bank.
Garage door - what the hell are they talking about? A fresh coat of paint, while it protects the underlying wood or metal, does not add one red cent to the actual value of a structure. Get lost.
I would call the guy back and get him to explain this to you as many times as necessary until you completely understand what they want you to do and, more importantly, why they want you to do it.
Also, call your inspector back and ask him about the firewall. The appraiser, your inspector, or both may be completely clueless.
...but I've never heard of a bank dictating what repairs need to be made for a loan to be approved.
Really? Happens all the time where I am. There is even a spot on our forms that says the seller agrees to pay up to XXX dollars in lender required repair costs.
It depends on the type of loan.
*Edit* And I think the fire stuff is probably legit, but cosmetic stuff, like the paint on the garage door, is just silly for a lender to require. And I don't think it would add greatly to the value. Did your first appraisal come in under valued? If not, they shouldn't need another one done. In addition, any increase in value is likely offset by declining values over time right now. An additional inspection perhaps makes sense, to make sure those items get done.
I assume that when you say "new house" you mean new to you.
It sounds like you are buying a house that was foreclosed on, bought by a flipper, fixed up and is being flipped.....making you the flippee I suppose.
As with many foreclosed properties, it has to be brought to current code. That means the current laws read a 1 hour firewall between the living area and the garage. This can be accomplished by the installation of 5/8th type X sheetrock. The flipper should have done it.
The peeling paint is an FHA issue unless the house is pre-1978 at which point it is a health and safety issue (lead based paint). Again, this should have been a flipper fix.
I don't deal with basements much, but in the parlance of what I am accustomed to, a "common wall" would also be considered a party wall or a wall where there is separate ownership on each side. I do not understand how a basement on a single family residence can have a common basement wall without there being additional superstructure common walls. However, it might mean there is no firewall between the utility area of the basement and the rest of the basement. This could very well be a requirement in some areas of the country. Again, this is an issue needed to be fixed by the flipper.
If the flipper bought it within the past three years, and is reselling it for substantially more than what he purchased it from, the lender may very well require a second appraisal to ensure that the market value is acutally what the first one said it is. FHA is currently requiring second appraisals on high LTV ratios or some cash out refi's, jumbo loan lenders are requiring two appraisals (frequently).
Regarding the question "can the lender require that," remember, it is their money. They can ask for anything they want. You either take their terms or go elsewhere.
Okay, thank you for the advice and comments, I really appreciate it as I feel very overwhelmed by this process. This is not a new build, it is an existing loan. FHA financing through GMAC. I agree that the fire wall should have been pit in becasue there is living space above the garage and it is attached to the home, not a car port.
I am buying the house for 202k and the bank appraisal came in at 204k as my LO told me when I asked her. As the house is already worth more that the purchase price would another appraisel be needed? Or how much of a cusion does a bank look for. Very confused
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
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The FHA loan is why you need these repairs. They have a much more strict policy on the condition of the home. If you had a conventional loan, the lender wouldn't be requiring these things.
OK -- some clarity. Your are FINE with ANY appraisal that comes in at or above your agreed to price. Don't waste time / thought on that.
Since this is an FHA loan the property has to meet FHA standards. Those standards do include have all exterior surfaces that are painted to be in "sound" condition, which generally means no peeling paint. The seller will have to get that scraped and repainted, or just get a new door, if that is cheaper.
I'm surprised the home inspector did not pick up on the firewall and the appraiser did. If it is not a city code violation I doubt the bank could require that being done. As to the paint, FHA is big on lead based paint chips, that has to been done prior to closing. As to paying for another appraisal due to an increase in value, what increase? If the lender pushes that shop around for another loan.
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