01-26-2013 10:54 AM
My wife and I have been in the market for our first home for a little over a year now. We found our dream home about six months ago listed as a short sale, but sadly an all-cash investor offer was accepted over ours. For whatever reason the short sale did not go through. So now as our luck would have it the property is set to come back on the market as a Fannie Mae REO.
Here is my concern. Since we were able to view the house before and to speak with the previous listing agent, we are aware of major problems with the property (leaking roof, visible mold on ceilings, unpermitted shed). Because of these problems, I am assuming that a conventional loan would end up failing us at the point of lender appraisal. Consequently, I am thinking that our only option is to go with a HomePath loan, since Fannie Mae waives the appraisal on these. Am I right about this?
01-26-2013 03:19 PM
You are correct. If it is a fannie mae property go with homepath. You can in most cases get a homepath renovation loan too, taking care of all the repairs. Make sure you get your offer in within the first look period, the first 15 days when it is only available to owner occupants.
01-27-2013 08:45 AM
Based only on what you have specified in your post, it is unlikely that a regular homepath loan will work and you will need to use a Homepath renovation loan or similar renovation loan in order to finance this property.
If your goal is to minimize costs and snag a bargain, this is probably not the right way to go. You will find that the costs and fees involved with a renovation loan are far higher than a standard 30 year mortgage.
If you use a renovation loan make sure that you already have a trusted general contractor that is on the ball and willing to do a ton of paperwork and estimates AND your lender has recent experience with the specific loan program you are trying to use.
My experience with a homepath property in escrow right now is that it is a very opaque and frustrating process for my clients. The escrow companies that Fannie works with, the realtors they hire and the process they require are all more difficult to deal with and the costs involved with the renovation loan are at least double what I have seen for 'regular' loans and are taking 30 days longer to close.
01-27-2013 11:19 AM
Thanks, Sheriff and Adam. The information you provided, Adam, based on your own experience gives us a lot to think about, and your advice and suggestions are well-taken. I really appreciate it.
01-29-2013 03:28 PM
Don't put the cart before the horse. The inspection is determined by the quality and skill of the appraisor which varies wildly. They probably wont even notice many of the things you have noticed.
My appraiser (for an FHA loan on a short sale with obvious defered maintenance left anf right) noted the following:
water heater not strapped
missing smoke detectors
crack flooring (trip hazard)
hole in the floor (bigger trip hazard)
door off hinges
I asked permission from the seller to let me do these repairs myself over the course of a week. Easy and cheap, done.
What the inspector failed to notice was:
active termites in numerous locations
collapsing garage structure
2 broken windows
original (and live) knob and tube electrical wiring from turn of the century buried under shredded newspaper insulation throughout attic, much of it with rotted clothe insulation
inoperable shower (water shoots out of the cold water knob which is nowhere to be found)
inoperable heater for second floor
Anyway- what I'm saying is you never know what an inspector is going to zero in on and what they'll miss. Order the appraisal, don't say a thing. Hope you get someone who's in a hurry. Then hire your own inspector before or after so you know what you are buying. You could luck out. I also contacted the appraiser myself after the inspection and let them know I was doing the repairs myself because I wanted the house... they became even more lenient and reduced the list of repairs I had to do to close escrow. They had set the bar higher when they thought they were 'protecting me as the buyer'... but I just wanted the darn loan!