Profile picture for cvhsquared

inspection report/appraisal on a foreclosure

My husband and I have been trying to purchase a foreclosure now for over 2 months. We submitted 2 offers but both were rejected. We felt our offers were fair so we paid privately for a full appraisal. The appraisal came in EXACTLY at what we offered. We then paid for a home inspection which turned up 40k in needed repairs. The bank refuses to look at or consider the property condition and listing agent keeps saying "AS IS" sale. While we understand that, we are simply trying to advise them WHY our offer is what it is. We have been told, that neither of these factors really matter to the bank. They simply have a 'number' based on DOM and will not consider any outside information and do NOT want to be advised of issues with property condition because then they would have to disclose it.

HELP! We are not sure what to think/believe. It's hard to conceive that the bank would not need to consider the appraised value and property condition when determining an appropriate sales price or offer?!?!
  • December 11 2010 - Richmond
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Answers (14)

First off, are you working with a buyer agent who is representing you - or did you "go it alone"?   What you are hearing is pretty common.  I work with a number of contractors who buy distressed properties for cash, no questions asked, in the" as is, unknown condition".  It seems that the banks don;t use the common sense that we think they would. Did your appraiser have the P & S when he did the appraisal?   Best of luck to you. It is a numbers game for the banks, and no emotion.
  • December 11 2010
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Profile picture for Navona Hart
This is when your buyer agent is valuable and very important.  Lean into them to help you resolve these issues.  It is very important for you to work as team to resolve your issues.  Good luck
  • December 11 2010
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It sounds like you have hit an impasse, so rather than waste more time and effort, move to your next property.

You could, of course, submit the offer with your supporting docs, the estimate and appraisal...but do you really want to offer the "appraised" price on a home that you have now discovered needs 40K in repair?

Cut your losses to the time and appraisal/inspection reports and find a better home!
Best wishes, Jim

  • December 11 2010
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I completely agree with Laura, banks have no emotion, they look at the numbers, almost nothing can convience them. You can try, of course, they may be willing to consider your offer if there are no other offers at the moment and the property was long enough on the market, so yes, then they should listen why it is not selling or no high offers are coming.
  • December 11 2010
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As an REO agent it has been my experience that most of the banks have thier own system for evaluating offers based on thier appraised value and days on market. They are definatly not emotionally involved in the transaction, the offers they reject simply do not meet the criteria to be accepted. Usually if you are close they willl at least counter your offer. They will continue to reduce the price based on days on market and I have seen them take a property off the market and send it to auction.

I agree that you should cut your losses and move on to another property.

Good Luck

  • December 11 2010
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I concur with the responses above.  The price that the bank will accept is about a formula that doesn't always meet with reality.  You can't convince the bank to consider other data.  They probably have too many properties to care about one sale.  The good news is that if your appraisal is correct that the property will be unsellable to anyone financing the property.


My suggestion is keep looking, but keep an eye on the property that you want for future price reductions.  When it gets to 5% to 15% above your price, resubmit your offer.
  • December 11 2010
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I am answering as a buyer's lender on this type of property.
A home inspection is a totally different document then an Appraisal.
2 very different things.
As a lender I care only what my Appraiser lists on his Appraisal.  I do not care a bit about a home inspection report - nor do I usually even see it.  
I have a question - -
did the appraisal you received list the items that need to be fixed?
Is the house - per the appraisal - habitable "as is"
OR did the appraiser say that in order to get a loan on the property items have to be fixed.  It should state that on the appraisal with (often) a list of things that MUST BE fixed.
As a lender - for you or anyone - to buy that house and get a loan the seller would have to pay attention to those items.  Remedy them in some way -- if that is the case.   Look at the MLS listing.  Does it say "cash offers only"  or say what loan programs can be used?
Is it owned by Fannie Mae and eligible for a Homepath loan?
How did they represent the house on the listing?
Do you see my point?
You can get an FHA 203K loan where I roll the costs of the repairs into the loan if it comes to that.
Sincerely,
Celia
  • December 12 2010
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>>>You can get an FHA 203K loan where I roll the costs of the repairs into the loan if it comes to that.<<<

The bottom line is that with FHA 203K, you, the BUYER, will pay for the repairs - and FHA 203K loans are rather expensive.

The question is: Is this home worth the TOTAL cost to you? Do you love this home so much - for whatever reason: location, floor plan, Aunt Suzie living on the same street, etc - that you are willing to pay?

If not, there are other homes as good, or perhaps better, waiting for you to be purchased. 

Good Luck!

 
  • December 12 2010
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203K loans have costs to them HOWEVER you can take the costs in rate ... now then you have a FHA loan which all day long you can easily streamline refinance into a lower rate after just a few payments.
Very effective - do this transaction all the time. 
A great strategy!!
Sincerely,
Celia
  • December 12 2010
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Since you PAID for the appraisal, talk to the appraiser as ask if they factored in the $40K of inspection issues. Remember, the appraiser is NOT an inspector. The appraisal value should be what YOU should be able to sell it for NOW not considering those problems. If the appraiser considers the property worth X NOT considering the $40K, then its really worth X-$40K, not the offer price. THATS why you get these inspections, so you wont get burned later and that you have more of a handle of this homes exact value. Try to talk to the appraiser, and ask their opinion of the homes value after the $40K of improvements are made. Maybe these items are typical for the area.

The $40K may be obvious, or not - ie retaining walls are very costly but add ZERO value to a homes value. Get informed and wait till the bank lowers their price.
  • December 12 2010
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The bank doesn't care about value, reason or logic. They have a number they want at that's it.  MOVE ON, find another home to purchase. You have done all that you can. You probably wasted your money on a home inspection as it is. You knew the bank wouldn't take your offer, you should have save the money.
  • December 13 2010
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When the banks are sellers there is not the emotional ties or the feeling of desperation that traditional sellers have.  It sounds like they might not have a experienced agent giving them good advice in the first place, or got a bad BPO.  Do you have a buyers representative helping you?  Submit your supporting information along with your contract and ask the sellers agent to pass it on.  Sometimes deals don't work out. 
  • December 13 2010
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I agree with the move-on responses.  It's very unfortunate you put so much effort into this home only to be met with such resistance. The way the banks operate with respect to distressed properties very often seems to defy logic.

Keep this one on your radar and look at other homes.  Good luck!

Patrick Duffy
  • December 15 2010
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Barry stated: "As an REO agent it has been my experience that most of the banks have their own system for evaluating offers based on their appraised value and days on market."

Since the REO Property is just a number to the bank and property condition is unknown. "Their" appraised value doesn't have much merit. It's definitely a Buyer Beware Situation. You may find greater value by looking at non-distressed properties. You will save time and won't experience the aggravation. 

Happy funding, Rudi
  • December 16 2010
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