Profile picture for u6crash

Seeking improvements on a short sale

I went looking at homes with my Realtor this last weekend and to my surprise the one I liked best was the lowest priced one, a short sale in need of a little TLC. I've done a little reading on the short sale process and I know that most of these are "AS-IS" and can take some time to process. Here's where it gets weird.

The issue that concerns me most is the leaky roof. It leaks through the wall in the kitchen. Haven't made an offer yet and haven't had a home inspector look at it so I don't know if it can be patched or if the whole roof needs to be replaced. So let's say I put an offer in today and it takes four months to close. What I'm worried about is how much worse that problem could be if rain continues to come in over the next four months.

My loan officer said "please know that if there's an issue with the roof, it will need to be addressed prior to closing in most situations." My Realtor (and research) tells me that most short sale sellers aren't going to put money into a home because they are already selling it at a loss. If my bank won't approve the sale of a house with a leaking roof, does that mean I need to find another bank or another house? Who else is going to be able to buy this house and why wouldn't the bank let me buy it? I plan to use a conventional loan, this is a first time home purchase, and I'll be putting 20% down.

How realistic would it be to offer more (up to the cost of replacing the roof) than asking price with more earnest money than usual to convey the seriousness of my offer, but also stressing how important it is to my lender that the roof isn't leaking? I'm open to other possibilities too. I could probably afford to fix the roof myself with some handy family members after the fact, but like I said, I hate the idea of three of four more months of rain coming in through that wall not knowing how bad it is exactly.
  • May 09 2012 - Dekalb
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Answers (15)

Best Answer

Profile picture for Brad Pratt
What Sharon said.  Then find a lender that will do a 203k loan.  Done deal.
  • May 09 2012
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I am so excited for you that you found a home you want to pursue. It looks like you are armed with good information. MANY of my buyers do a

PRE inspection BEFORE approval and if you go 203 K you MUST do this prior as ,they take longer to approve AND you need to get bids to know what kind of money you would need to borrow .

For one buyer,it was enough early information to walk away from the home and hence they bought another one they like better..so the money was well spent.

For another buyer,we used the information as a means of negotiation when the bank countered the offer.We were ready and prepared for them.

Even though ALL short sales are As-IS you always have inspection contingency.

BEAWRE though,when you do it early ,especially with a constantly leaky roof,the condition you see now can drastically be impacted in 4 months from water intrusion and other factors.

I would NOT sign off on inspections now,NOR would I lose the contingency to revisit the condition AFTER short sale approval.

Leaky roofs can wick themselves into many places,MOLD can be a serious issue as well.If the conditions are right that can cause thousands of dollars of remediation with an ongoign water intrusion.

You mentioned the higher cost of the 203K ,what did you allow for as an estimate for insurance? I would check that as well.You hate to go through this to find out the roof MUST be installed prior to closing or 30 days after to keep or even acquire insurance.Then they premium is double just until the replacement is done.
That could throw your budget off big time.

Make sure you have someone protecting your interests,this is alittle tricky ,only it can be done successfully.
best wishes Suzie


 



  • June 15 2012
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Short sale fraud is rampant right now, not only here in my home state of Florida but all across the country.  If you buy that short sale home as is, then you'll be responsible for whatever you find there. 

Please[Hotlink deleted by Zillow moderator. Please see our Good Neighbor Policy for more information.]that thought her short sale was a great deal, until after she closed and then the kid's bath water wouldn't drain. 

[Hotlink deleted by Zillow moderator. Please see our Good Neighbor Policy for more information.]-- too much to type in this reply on Zillow.

Please be very careful here.
  • June 15 2012
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Actually, a better location to find a good primer on rehab lending...

search > "203K Loan Possibility"

Or the following link:

http://www.zillow.com/advice-thread/203K-Loan-Possibility/433665/

  • June 05 2012
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I just answered a similar question to this in a four-part response, please go to the main zillow site --> advice --> search --> "FHA Construction" and click on the first link.  (I'd post the link but the site prohibits it).

It'll tell you a great deal about what you'll need to do to proceed with a FHA rehab loan.

  • May 21 2012
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Profile picture for u6crash
Small update: Talked with the lender today and a FHA 203k sounds like the best route. First I'll have a contractor or two make some estimates, then maybe an offer. I was pleased to find that I could even use the improvement funds to finance a washer and dryer since the home doesn't come with them. Still tentative, but it looks like a FHA 203k is the best way for someone to do this.
  • May 10 2012
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Profile picture for u6crash
My loan officer has mentioned the possibility of a FHA 203k loan to include improvements, however, I'll then be paying mortgage insurance and have a higher monthly payment. I haven't ruled it out, but it isn't really the path I want to take.

Why am I interested in this home? It's just the one that speaks to me. I was a Realtor some years ago (not for very long; it wasn't for me) and one thing they told me to watch for with buyers is when they start arranging furniture in the home and picking colors for walls, that's when you know your client has found the home for them. Of the seven I looked at, this is the only one I started to do that with. 

Making an offer contingent on a home inspection sounds like it is more common in some areas more than others. It happens here often with so many homes being sold as-is.
  • May 09 2012
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Profile picture for Ofe Polack
Is this the only property that you can buy or want to buy?  With so many homes on the market why are you so interested in this one in particular?  If you want to pursue the purchase then try to obtain an FHA-301 loan that allows you to build-in the cost of repairs into the loan.  Personally I would save myself the headaches and look for another property, but if you want to continue on with this short sale offer, then make your offer contingent to a Home Inspection, meanwhile you can obtain estimates from a few roofers.  You said that the water leaks through the wall in the kitchen, if that is the case, there may also be mold on that wall....
  • May 09 2012
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Who in their right mind spends money on an inspection on a house they don't own yet?  Not any of my clients.

You absolutely can ask the bank to provide you with repairs or negotiate a lower price based on any material defect. 

In FL, a roof like this will prevent you from getting insurance.  Whether you are paying cash or getting a mortgage, no one is buying a home they can't insure.  And a bank that lets you go because they won't fix a roof will encounter the same problem with the next potential buyer.

Ask for a price reduction or for a repair credit and get estimates from licensed roofers.
  • May 09 2012
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Profile picture for B Mike West
Focusing on the roof issue may be premature.  You are assuming that the lien holder, or holders, are going to approve the short sale. There is absolutely no guarantee that will ever happen.  You should first look ath teh seller's hardship to see it is sounds like there is a possibility that the short sale will be approved.  Find out who the lien holder (s) are and see if they approve many short sales.  Some lien holders are very difficult to get an approval from.

Neither the lien holder(s) nor the seller are going to pay for a repair and very few conventional lenders are going to fund a loan with a leaking roof.  You might want to look into an FHA 203K loan which may deal with your roof leak problem.

As Maria says, it will be much easier to find another home without the built in roadblocks to a purchase.
  • May 09 2012
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I don't see why bother with this property when there are so many good deals.

The fact is  that owner Banks  are not going to do repairs and the other fact is that even if you do a conventional loan the lender most likely would refuse to approve  the loan before repairs for the same reasons you quote of time and further damage etc..
  
Owner Banks will rather sell properties to cash investors a discounted prices instead of dealing with this issues.  

I would recommend looking at another property and save youself a lot of  agravation, waste of time and possibly loosing the property inspite of all your efforts.
  • May 09 2012
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Profile picture for realtorss
Hi,
I would suggest that you get your home inspection first, before making the offer. You may also want to hire a roofer to inspect the roof so you know the extent of the visible issue. Most home inspectors can not advise on how to repair the property and will refer you to an expert. With an estimate for the cost of the repair, make your offer minus that amount. Make sure the listing agent has access to the report and your estimate so that the listing seller and short sale lender are aware of the issue and the expense. It may help you get the property purchased for a price point that makes it worth your while. Your bank may allow you to put money into escrow to make the repairs after closing. The seller will most likely not have the funds to make the repairs so you should be prepared to make the repairs yourself.
  • May 09 2012
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Profile picture for Cindy Quinton
You might try seeking out a lender who will do a "rehab" type of loan. There are lenders in my area who do a conventional rehab loan, the costs of the repairs are escrowed and the repairs happen after the purchase closes. I think you have to look for a different lender in order to move forward.
But it sounds as if you are a qualified borrower with a downpayment, so you have options.

We are going into dry months, so that helps, but if you make an offer, your agent needs to create verbage that protects you from any additional damage. Also, the house could be protected with a simple tarp. In fact the current lender needs to be aware that the leaking roof is an issue, and the leaking could be being caused by wind or hail, which means the homeowner's insurance would cover the cost of the repairs.

I can almost assure you that if you decide to move forward with this purchase it will be more difficult and time consuming than a traditional home owner selling to an eager buyer, but it still may be doable....if you so desire. Good luck, I am buying a home myself this year, and so far an REO is the only one I really like.
  • May 09 2012
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If your lender will not make the loan with the condition of the roof, nothing else matters. The deal will not happen. You may need a rehab loan or pay cash. The other side has zero leverage or incentive to help you. Keep looking.
  • May 09 2012
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You can do "pre-offer" inspections. Why not invest the money in an inspection of the roof first. You were going to offer more money anyway and this would be less expensive. Then you can decide if it's worthwhile waiting out a short sale or not. If it just needs to be patched, perhaps you can have it patched and then ask for the credit back at closing. Put that right in your offer. I think it will come down to 1) how much you love the house and 2) how much it will cost to fix your potential investment?
  • May 09 2012
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