Ask the RealtorAnswering your questions about 203K

jennifer daywalt

The buyers have asked me to make a major repair found by an inspector. I said no and the Realtor & Buyers haven't responded to me or my Realtor. They state that it is a condition to get the mortgage. If they go with different mortgage company to see if they will accept "as is" won't they need another commitment date?

There are a few missing pieces in your question. First it seems that you are stating that the mortgage company is requiring the work to be completed. I want to clarify for you. It probably isn't the mortgage company per say but the type of mortgage they are utilizing. If they are utilizing FHA or VA then changing mortgage companies will not change the fact that the repair has to be completed. When a borrower is utilizing this type of financing a case number is assigned to the house and the appraisal and the case number follows the house. So unless they are changing to conventional financing then this required repair situation is not going to change. It is extremely rare that a conventional mortgage will require any type of repair to a home so I have to assume they are indeed utilizing FHA or VA.

This then means that it doesn't matter if they responded in time or not because they will not obtain the mortgage without the repair being completed if it is required by the mortgage company therefore they will have an out under the mortgage contingency which I assume they have. If they can't get the mortgage then they can't purchase the home and you will end up returning their deposit on the house. (Again if a mortgage contingency is part of the Agreement of Sale and if the Mortgage Company truly is requiring this repair.)

It seems strange that the buyer's agent has not responded to your agent however I suspect it can be for the reason above. Perhaps they are waiting to get closer to the closing date in order to make it more difficult for you to walk away from the sale. (Although this is just one reason and not necessarily THE reason.). First IMMEDIATELY have your Realtor contact their Realtor and find out what the current situation is! If they are using conventional and the repair is not being required by the mortgage company and you are past the reply to inspection date then they are in the deal and accepting the property. It does not matter if you put into writing that you were not going to complete the repair. The agreement states under an Option 1 and Option 2 that if you do not come to a written agreement between the buyers and sellers within a certain time frame then the buyer is accepting the property as is. Therefore in this situation whether you responded verbally or in writing does not matter as if the time period has passed and the buyers did not put into writing a termination of the agreement then they are accepting the property without the repair (except under the mortgage contingency as I explained above).

I would like to add however that you may want to consider doing the repair. It will probably be an issue with other buyers as you state it is Major. Perhaps you could offer a seller's credit for this issue. By doing this the buyer's could convert to a FHA203K however keep in mind that the closing date will have to be extended due to this. For example if the repair is $5,000 and the buyers are offering you 100,000 for your home, they would then get a mortgage in the amount of $105,000 however you would give them a $5,000 assist to pay for that repair which would be $5,000 less they have to come to settlement with. Good luck with your sale.

I have had many questions regarding the 203K so I've compiled them all and answered them here...

The advantage of an FHA203K financing choice enables a buyer to purchase a home that either will not pass an FHA appraisal or needs rehabbing. FHA sends an appraiser to a home that the borrower is purchasing. They go through the home to identify problems that must be corrected prior to the property closing. These problems can be GFCI's near water sources such as the kitchens, bathrooms and laundry areas, a roof and/or heater certification (if the roof and heater look as though they have problems), the scrapping and painting of all surfaces that have failing paint, repairing of any broken windows, railings being installed where they are absent, upgrading of electric and the electrical service wire coming into the house. Rehabbing can be anything from refinishing hardwood floors or installing carpet to a new kitchen, new bath, new roof, etc.

The lender will send the appraiser to the home. The appraiser makes a list of what is needed in order for FHA financing to be approved. The buyer then makes a list of the repairs and/or renovations they want completed and provide the lender with a list of costs for those repairs/renovations from a licensed contractor. The appraiser then determines if the home will have the market value after the repairs/renovations are completed. For example...a buyer is purchasing a home for $100,000 however they are mortgaging an additional $25,000 for repairs required by FHA and for renovations they want completed to the home. The appraiser then determines if the home's value will be $125,000 after the renovations are completed. The $25,000 is then kept with the lender and allocated to the contractor (s) as certain work is completed. Keep in mind that the contractor has to be on FHA's list of contractors able to complete the work. They have to fill out paperwork and agree to payment according to FHA's guidelines. They must be registered with the State of PA and they must be licensed. The lender then releases the check in the name of the purchaser and the contractor as they see fit. The work must be started within 30 days of closing and must be completed within the time frame given to the lender in the paperwork previously supplied to the lender.

This type of financing is a great way for buyers to purchase a home and opens up the opportunity for many more buyers to be interested in a home for sellers.

Who offers FHA203K financing? Wells Fargo Home Mortgage has one loan officer in this area that does process these types of loans. For more information you can contact Kimberely Kozelsky at 610-495-3302. There are others I am sure but the list of those offering this type of financing has dwindled. Check with your bank to see if it is a loan that they offer.

Contractors who are approved by FHA....Rick Wilde, Inc. reachable at 610-842-3796. Again there are others I am only mentioning those here who I have personally dealt with. You can certainly ask your lender for a referral or ask your contractor if they are approved.

When making the decision to finance with FHA203K be sure that your Realtor is EXPERIENCED. These are difficult loans to get through and if one person in the equation...Realtor, Lender, Contractor...is not familiar and/or experienced with these loans it can cause many problems.

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