FHA Seller Repairs Required

If you are interested in purchasing a distressed home, or one that’s been foreclosed upon, it probably has some “deferred maintenance items” that need to be done. Getting the Seller to DO those items, however, is normally difficult. So the question becomes, what will FHA let you leave undone, while still giving you an FHA Loan on the home.

Here’s what we’re seeing with some “unique” foreclosed Bank Owned Properties and “handyman specials” in December of 2011.

Un-permitted Improvements:

In the last year or two, we’ve seen a couple of situations where a Seller has finished off a bonus room, upstairs, or converted a garage into a living space. If this was not properly inspected and permitted, that space will not be calculated in the value of the property. Sometimes, non-permitted additions and remodels are not completed to code. For instance, if the garage conversion doesn’t have adequate heat or insulation, the FHA appraiser / underwriter may require that these items be brought to code.

FHA Appliance Requirements:

The Electricity needs to be working for an appraisal to be done. FHA is looking for a “cookable” space. FHA does not require that you have a dishwasher, for instance… but if there’s a WHOLE in the cabinet, where a dishwasher goes, then there needs to be one there (sometimes we’ve seen folks purchase cheap ones from Craigslist just for the appraisal). We’ve also seen spaces for a Microwave, where a Seller filled it with Cookbooks, and no microwave was required.

The stove IS required, and the appraiser is required to turn it on, and be sure the burners are heating and the oven cuts on. An operable refrigerator isn’t necessary to meet FHA appraisal standards, but the kitchen should be designed so that a working refrigerator can be installed.

FHA Heating and Air Conditioning Requirements:

We’ve recently been contacted by someone wishing to purchase an historic home and finance the property with a FHA Mortgage loan. This particular home ONLY HAD a pot bellied stove, and in speaking with Underwriters and 203k Inspectors (we’re not allowed to talk to actual appraisers), we don’t believe a home that is 110 years old with no central heat, in NC qualifies for this financing.

FHA defines Heating and Air Conditioning as separate from “appliances,” they only require the heating unit works and is able to heat the home. Although we get pretty warm in the summers here, FHA does not require that the Air Conditioning unit work… if you can see that the unit has been stolen, for instance, the Underwriter WILL require that it be replaced prior to closing. If there was never central air in the home, you don’t have to add it.

FHA Pool Requirements:

Unlike USDA Home Loans, FHA Underwriters do not have major restrictions on making a loan for a home that has an in-ground (or above ground) pool. Any home with a pool must have a working pool pump capable of circulating the pool water and the pool must have enough water in it so that the pump can effectively circulate the water. You don’t need to test the water or ensure that it is clear, but the water must not pose a health or safety risk. Your best bet is to ensure the water is clean and clear…

IF you live in an area of North Carolina that REQUIRES (code) a fence around the pool (many Cities and Subdivisions do), and there’s major repairs that need to be done to the fence – it will likely be noted on the appraisal, and the Underwriter will likely require that it be put to code. If there are missing or cracked tiles, do those need to be fixed prior to closing? Probably not.

We have more information on Basic repairs required by FHA, and what the Appraiser is looking for… for instance, the Seller use to be required to “re-grout” the bathtubs, but that’s no longer considered a required item. FHA is, however, very interested in LEAD PAINT – so, if there’s an out building that looks like it has lead paint peeling, even if it is not a living space, it is probably going to be on the required repairs list.

Looking for BASIC FHA Underwriting Guidelines in NC? We can help! Want to know more about how to purchase a Foreclosed Home in North Carolina? We’d love to talk to you about how to make this work! Please call Steve Thorne, Mortgage Banker in Cary 919-649-5058. We offer FHA 203k Loans which are renovation loans, and we have NC Housing Finance Agency money available to work with FHA mortgage loans too!