Profile picture for user8682418

How to finish the appraisal if the unfinished work is part of the price negotiation?

Hey, I put an offer on a recently remodeled single-family house. When I negotiate the offer with seller, I am aware 2 bathroom ( master bathroom and 1 bathroom in basement) not finished ( all plumbing done though ) and the gutter system not completed. The seller promised to finish everything required by Certificate of Occupancy. At that point due to my lack of experience I didn't expect this will be a problem for my loan application. Now the appraisal report put these 2 bathrooms and gutter system as the condition to finish the appraisal. The seller won't spend money on the bathrooms and gutters coz it has been reflected on the price. But on my side, without those finished, I cannot get my loan approved. Please help me with any advice/suggestions you have. What choice do I have? Thanks a lot
  • November 29 2012 - Westchester Heights
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Answers (6)

Best Answer

Profile picture for jaysiah
Although the seller and you both thought you could get a loan without all items completed, you now know that is not possible (do either of you have Realtors involved??  They know what it takes for Cert of Occ!).  So, the seller cannot sale to ANYONE (except cash offer) without finishing the projects...without the cert of occ.  If he wants to sell, the project MUST be completed; no way around that.  He may want to renegotiate the price because the current price is doesn't include the finishes. Here's what I'd suggest:
1. Get a couple of bids
2. Make sure contractors are willing to be paid at closing.
3. Ask the seller to pay for those repairs out of his proceeds at closing (emphasis his need/desire to sale and how no one else will be able to buy if he starts over and puts it back on the market.)
4. Shoot for the moon, but be realistic, he probably will not agree to pay for it all. 
5.  Be prepared to increase your purchase price to cover the costs.

With rates so low,  you can increase your loan $10K and it only makes about a $50-$60 a month difference on your monthly mortgage payment. 

This can all be completed on a simple addendum.  No need to start over.

Hope that helps!
  • November 29 2012
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Profile picture for Ofe Polack
Jaysiah has given you a very good answe, r in the event that still want the house.  At the beginning I was under the impression that there was no buyer agent involved, but on one of your responses I see that you do have a buyer agent.   The agent should know how to write an offer and also the fact that verbal assurances by the seller mean absolutely nothing.  The fact that the offer was subject to the completion of whatever was necessary to obtain the COO should have been part of the offer.  Now be flexible to negotiate!  In the event that you want to back out, since you cannot get the loan with the house as is, may also allow you to walk out under the financial contingency, I haven't seen how the offer was written, take a look. 
  • November 29 2012
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Profile picture for jaysiah
Talk with your realtor RIGHT AWAY!  I'm in Washington, and our financing contingencies have very strict timelines.  If you cannot get financing due to the appraisal and you want your earnest money definitely get your realtor to put that in writing and get it submitted immediately.  Depending on other contingencies you may still have in place, you may have other options for getting out with and getting your earnest money released. 

Good Luck!
  • November 29 2012
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Profile picture for user8682418
Thanks so much for your reply! 
We do have realtor involved. However, neither my buyer agent nor the seller's list agent ever mention this to me. As the first time home buyer, I never think of this problem when I put down my offer.

If I wanna back out from this purchase due to this problem. Can I get my 10% "earnest" money back?

  • November 29 2012
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Profile picture for user8682418
Sorry for the confusion, let me try to clarify :

When I put offer on the remodeled house, there are several things not finished : 1) two bathrooms 2) gutters system 3) fireplace 4) step down patio/deck at the back of the house.

The seller said he will finish 3) and 4) in order to get the Certificate of Occupancy to sell the house but will not finish 1) and 2). The seller believes that he can sell the house by only completing 3) and 4). At that time I didn't realize this will be a problem for my loan application so I agreed and I plan to finish 1) and 2) as soon as bought the house. And we negotiate price based on this agreement. Now the appraisal report requires  all of the items 1) 2) 3) 4) to be finished before closing. So what I can do now? Re-negotiate with seller? Does that mean I have to sign a new contract and start the whole process again? Or do I have any other options here ? Thanks!

BTW : the loan is not FHA loan just conventional loan.
  • November 29 2012
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I am confused, you said the seller promised to complete everything and then you say he will not because of some reason. It sounds to me as if you negotiated a price based on the as-is condition at the time with some things still unfinished. That is all well and good unless the lender has an issue which it sounds like they might. It sounds like you might need to renegotiate the price based on the seller finishing everything to make the lender happy. Is it a FHA loan? Those can more problematic over things like this than a conventional.

Tim
  • November 29 2012
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