Unexpected repairs after FHA appraisal

[Jacob Northfield]

Hi everyone,

I'm under contract and about to close on a duplex. The offer had an inspection contingency, the property was inspected, repairs were made, and the contingency was removed. We then had the house appraised with no issues. At the time I was pre approved for a conventional loan, but due to underwriting issues the bank switched me to an FHA loan. This is fine with me except that a new inspection needed to be done. This inspection came back citing issues with the paint, the garage door, and some problems in the basement, and now I can't close until these repairs are done. We are supposed to close the day after tomorrow. I have a 4k earnest deposit, then the costs of the inspections and appraisals, as well as about $800 remaining for the downpayment, so I don't have too much into the deal cash wise, but I would rather not lose my deposit. I am not in a position where I can make the necessary repairs this month.

My question is, am I responsible for these repairs or can I have the seller make the repairs and push back the closing? Any advice would be appreciated. Thanks in advance.

[Russell Brazil]

Quote from @Jacob Northfield:

Hi everyone,

I'm under contract and about to close on a duplex. The offer had an inspection contingency, the property was inspected, repairs were made, and the contingency was removed. We then had the house appraised with no issues. At the time I was pre approved for a conventional loan, but due to underwriting issues the bank switched me to an FHA loan. This is fine with me except that a new inspection needed to be done. This inspection came back citing issues with the paint, the garage door, and some problems in the basement, and now I can't close until these repairs are done. We are supposed to close the day after tomorrow. I have a 4k earnest deposit, then the costs of the inspections and appraisals, as well as about $800 remaining for the downpayment, so I don't have too much into the deal cash wise, but I would rather not lose my deposit. I am not in a position where I can make the necessary repairs this month.

My question is, am I responsible for these repairs or can I have the seller make the repairs and push back the closing? Any advice would be appreciated. Thanks in advance.

Id suggest that since you changed loan products, presumably without the permission of the seller, that you pay to get these items repaired so that you close and do not default on the contract. Seller likely would not have accepted an offer with FHA financing due to likely required repairs.

[Theresa Harris]

You can ask the seller to push back closing. They are unlikely to be happy if they needed to sell this house to buy their next one.  You already had the house inspected and asked the seller to make repairs which they did.  If I was the seller and you asked for more repairs, I would not be impressed.  You can try asking, but they may want something in return-eg higher asking price.  

What does your realtor suggest?

[Jacob Northfield]

My realtor suggests paying for the repairs, but I wanted to ask here because after working with him for a few months I do not trust him. Specifically because he does not communicate anything to me without me hounding him.

[Nathan Gesner]

You switched financing, which triggered a new inspection that resulted in necessary repairs. That's your issue, not the Sellers. Make the repairs, get her closed, and consider this an important lesson for the future.

[John C.]

@Jacob Northfield

Make you understand the difference in MIP, (mortgage insurance premium) and PMI, (primary mortgage insurance) are and the cost and terms of each.

Refinance as soon as you can, MIP will change your return numbers.

[Galen Ikonomov]

Quote from @Jacob Northfield:

Hi everyone,

I'm under contract and about to close on a duplex. The offer had an inspection contingency, the property was inspected, repairs were made, and the contingency was removed. We then had the house appraised with no issues. At the time I was pre approved for a conventional loan, but due to underwriting issues the bank switched me to an FHA loan. This is fine with me except that a new inspection needed to be done. This inspection came back citing issues with the paint, the garage door, and some problems in the basement, and now I can't close until these repairs are done. We are supposed to close the day after tomorrow. I have a 4k earnest deposit, then the costs of the inspections and appraisals, as well as about $800 remaining for the downpayment, so I don't have too much into the deal cash wise, but I would rather not lose my deposit. I am not in a position where I can make the necessary repairs this month.

My question is, am I responsible for these repairs or can I have the seller make the repairs and push back the closing? Any advice would be appreciated. Thanks in advance.

 Jacob, TOP Mortgage Producer here.

What is the reason they switched you from a CONV to FHA? Are you working with a Broker or with Direct Lender?

[Sarita Scherpereel]

Hi @Jacob Northfield I'm sorry this is happening. It sounds very stressful. In my market we have a disclosure for this. The seller might be required to make repairs up to a certain cost (that negotiating happens prior to contract). I have seen sellers not agree to make any repairs. At that point it is on the buyer if issues come up. Your agent should have discussed the possible risks on this specific property before you switched financing. I have had a buyer (only one time) make the repairs required prior to closing. The inspector flagged the property for needing a hand rail. My client installed one to keep the deal moving forward because we knew the seller wouldn't make repairs. They were older and living out of state so it would have been impossible. It was cheap and easy to do. 

With your issues, I'm not sure what the cost of the "basement" issue would be. In my market, you can request to push back closing. Check to make sure you're rate lock extension allows for that. 

If this doesn't work out you need another realtor. This should have been communicated to you during the change and the lack of response is unprofessional. Best of luck! 

[Jacob Northfield]

Quote from @Galen Ikonomov:

Quote from @Jacob Northfield:

Hi everyone,

I'm under contract and about to close on a duplex. The offer had an inspection contingency, the property was inspected, repairs were made, and the contingency was removed. We then had the house appraised with no issues. At the time I was pre approved for a conventional loan, but due to underwriting issues the bank switched me to an FHA loan. This is fine with me except that a new inspection needed to be done. This inspection came back citing issues with the paint, the garage door, and some problems in the basement, and now I can't close until these repairs are done. We are supposed to close the day after tomorrow. I have a 4k earnest deposit, then the costs of the inspections and appraisals, as well as about $800 remaining for the downpayment, so I don't have too much into the deal cash wise, but I would rather not lose my deposit. I am not in a position where I can make the necessary repairs this month.

My question is, am I responsible for these repairs or can I have the seller make the repairs and push back the closing? Any advice would be appreciated. Thanks in advance.

 Jacob, TOP Mortgage Producer here.

What is the reason they switched you from a CONV to FHA? Are you working with a Broker or with Direct Lender?

Hi Galen, thanks so much for your response. They didn't tell me why they switched me to FHA. I just got a frantic call from my Broker's assistant saying there was a problem that they were fixing, I just needed to switch. I wasn't told anything else. This happened after I had a Loan Estimate.

A community org here is loaning the money for closing costs through a small second mortgage, and I was assuming that this was the reason, but when I spoke to the org this week I was told that they had nothing to do with this and they work with conventional loans all the time. 

I regret using this broker because the communication has been just as bad as that with the agent.

[Jacob Northfield]

Quote from @Sarita Scherpereel:

Hi @Jacob Northfield I'm sorry this is happening. It sounds very stressful. In my market we have a disclosure for this. The seller might be required to make repairs up to a certain cost (that negotiating happens prior to contract). I have seen sellers not agree to make any repairs. At that point it is on the buyer if issues come up. Your agent should have discussed the possible risks on this specific property before you switched financing. I have had a buyer (only one time) make the repairs required prior to closing. The inspector flagged the property for needing a hand rail. My client installed one to keep the deal moving forward because we knew the seller wouldn't make repairs. They were older and living out of state so it would have been impossible. It was cheap and easy to do. 

With your issues, I'm not sure what the cost of the "basement" issue would be. In my market, you can request to push back closing. Check to make sure you're rate lock extension allows for that. 

If this doesn't work out you need another realtor. This should have been communicated to you during the change and the lack of response is unprofessional. Best of luck! 

 Thanks for your response. There was an inspection contingency that stated repairs would need to be made or I would be credited, but after I got the inspection report and conventional mortgage loan estimate, I signed that this was satisfied. 

The lack of communication from both the mortgage broker and the RE broker has been very troubling and I have been trying to stay on top of them to manage this, but I'm getting a different story depending on who I talk to and when. I majorly regret my choices of choosing both parties, and knowing what I know now about the process I would have stayed away. I did have a bank ready to give me a LE but I chose this broker instead. Big mistake.

[Galen Ikonomov]

Quote from @Jacob Northfield:

Quote from @Galen Ikonomov:

Quote from @Jacob Northfield:

Hi everyone,

I'm under contract and about to close on a duplex. The offer had an inspection contingency, the property was inspected, repairs were made, and the contingency was removed. We then had the house appraised with no issues. At the time I was pre approved for a conventional loan, but due to underwriting issues the bank switched me to an FHA loan. This is fine with me except that a new inspection needed to be done. This inspection came back citing issues with the paint, the garage door, and some problems in the basement, and now I can't close until these repairs are done. We are supposed to close the day after tomorrow. I have a 4k earnest deposit, then the costs of the inspections and appraisals, as well as about $800 remaining for the downpayment, so I don't have too much into the deal cash wise, but I would rather not lose my deposit. I am not in a position where I can make the necessary repairs this month.

My question is, am I responsible for these repairs or can I have the seller make the repairs and push back the closing? Any advice would be appreciated. Thanks in advance.

 Jacob, TOP Mortgage Producer here.

What is the reason they switched you from a CONV to FHA? Are you working with a Broker or with Direct Lender?

Hi Galen, thanks so much for your response. They didn't tell me why they switched me to FHA. I just got a frantic call from my Broker's assistant saying there was a problem that they were fixing, I just needed to switch. I wasn't told anything else. This happened after I had a Loan Estimate.

A community org here is loaning the money for closing costs through a small second mortgage, and I was assuming that this was the reason, but when I spoke to the org this week I was told that they had nothing to do with this and they work with conventional loans all the time. 

I regret using this broker because the communication has been just as bad as that with the agent.

 Call them and ask them to provide you the underwriting reason for switching you. And yes, it appears you are working with an unexperienced broker which sucks, especially when they are not communicating with you.

Have in mind a lot LOs are trained not to explain anything to the customers/clients in order "not to confuse them even more". Well, if someone is confused from the beginning, someone did a terrible job simplifying lol.