Freeze damage SFH - Lending bank requires turning on water for appraisal

4 Replies

Hello, My husband and I are in the process of purchasing our first investment property. It is a bank owned SFH with an electric boiler. The water service has been shut off on the property due to freeze damage. We made an offer on the property last night and I think the listing agent is pretty much not considering it because we will need financing for the house. He said that the bank would not give us a mortgage because they want the water turned on to do their appraisal which they can't do because of the freeze damage. Our mortgage officer confirmed this so now we're stuck and can't move forward with this. Does anyone have experience with this situation or can offer some advise? Thanks for your help. Corey

Corey- Wayne is right , you need to go the 203K or renovation loan route. I recently went through Wells Fargo for a construction/renovation loan on my personal residence which was a foreclosure. They will give you the money to do whatever you need as long as the appraisal value is there and you have a licensed/insured GC on the project. More paperwork but as I mentioned, as long as the purchase price + renovation funds are lower than the ARV they will give you the money to fix just about anything.

To your point about inspections, as you long as you put the repair cost for the freeze damage in your scope of work the bank will sign off.


Thank you Wayne and Andre for the ideas. It sounds like we do have some options for doing this.

@Wayne - How do the rates on a renovation loan compare to a conventional mortgage? We were trying to avoid the 203k loans if possible due to the PMI requirement. We're currently working with Webster and they never mentioned renovation loans. Thanks-

Hi Corey,

The strategy we took with a 203k loan was to get into the 203k loan first, and pay the PMI, and then refinance as quickly as possible once the renovation was completed and we had brought the property value up, so we could get rid of the PMI.

This is a more expensive option (you pay two sets of closing costs), but we couldn't afford the up-front costs on a conventional renovation loan, so it's what we did, and the numbers worked out once we evaluated the savings from eliminating the PMI.

I would shop around different lenders to see what kind of conventional renovation loans they offer. If they have one that works for your budget and won't require PMI, it would be great to get into that loan from day 1. But if not, you have the option of doing the 203k and then refinancing later to shed the PMI.