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Some sellers avoid
offers from buyers with FHA loans, because the appraisals are stricter — a deal
can fall apart if the house doesn't appraise at the purchase price — and the
loans take longer to fund and termite completion is needed (a problem for REO
listings) . Banks selling foreclosed properties (aka REO listings) balk at FHA
financing because again the FHA guidelines require the listing to be in working
order, and many foreclosed properties need repairs. If you’re bidding on a
property, and you have FHA financing, you may need to offer a bit more to win or see if you can qualify for a conventional loan with 10% down.
We’re seeing a lot of
bidding wars that result when the seller- often a bank- intentionally
under-prices the listing to create an auction-effect among buyers. Listings that
get 5-10 offers often seem to go for 5-10% over the list price. Totally
unscientific, but it’s what we’re seeing. Again, I always like to call the
listing agent to see what has come in, and I'm not trying to discourage anyone but
want to educate the buyers about the current market, especially when it comes to an REO
property. This verbiage is from a lender with regards to an FHA appraisal: FHA permits
"as-is" appraisals on existing properties, but conditions within the appraisal
may require repairs to be made by the seller of the property before FHA will
insure the loan. Repair requirements are limited to only those items that pose a
threat to the security/safety of an occupant and/or jeopardize the soundness
and/or structural integrity of the property.
OPTIONAL:
Items
may include, but are not limited to:
Inadequate
access/egress from bedrooms to exterior of home.
Leaking or worn
out roofs.
Evidence of
structural problems.
Defective paint
surfaces in homes constructed pre-1978.
Defective
exterior paint surfaces in homes constructed post-1978 where the finish is
otherwise
unprotected.
Standing water
against the foundation and/or excessively damp basements.
Hazardous
materials on the site or within the improvements.
Faulty or
defective mechanical systems (electrical, plumbing or heating). This includes
missing plumbing fixtures, and kitchen
appliances
Evidence of
possible structural failure (e.g., settlement or bulging foundation wall).
Wood Destroying
Insects/Organisms – Termite repair required only if evidence of active
infestation, or at underwriter's discretion.
Flat and/or
unobservable roof
From FHA
guidelines 3/27/09, subject to updates and revisions.
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