Financing Options / Appraisal Issues

[Mark Koontz]

I am currently under contract on a fixer-upper Farmette (Maryland). Purchase price is 400k with at least 50k rehab needed. I have 100k liquid to put down. The property needs a new roof, windows, drywall, electrical, bathroom, etc. That being said, it's not going to conventional financing. That leads me to where I am now - a conventional rehab loan. Are there any other options aside from the rehab loan other than cash? 

The issues:

-I wanted to put 50k down on the purchase, (lender will waive PMI with 10% down), and pay cash for the rehab and do part of it myself. The conventional rehab loan doesn't allow you to do any of the work yourself.

-The conventional rehab loan requires a general contractor to give one quote, with all of the subcontractors included. So I am paying a premium to the GC for the extra facilitation of the SC's. 

-I am quoted a higher interest rate and more fees since its a rehab loan. 

Appraisal Issues: 

-A separate issue is that there are two block garages on the property. One of them was struck by some heavy machinery and created about a one inch wide crack along the entire height of the wall. Will this create any issues when they do the appraisal? I am not worried about the integrity of the structure, but will the bank require this to be fixed? I added a photo of the crack. 

-There is a large amount of debris on the property including two 53' semi trailers that are in disrepair. Will the bank or insurance company require them to be removed? 

-The house and garages have wood siding with peeling paint. Any issues here? 

-The garages have broken windows. 

[Joe Norman]

The OP is currently exploring conventional rehab loans (presumably 203k or similar) which would indicate that he is intending to owner occupy, and therefore hard money loans are likely off the table (as most HMLs are not NMLS licensed and don't make owner occupant loans).

That said, to the OP, if you're looking at a conventional rehab loan you're just going to have to accept higher costs, less flexibility, and more red tape. It goes with the territory. I can't answer your questions about whether those items would be problems for your lender, and they are good questions for him. One option may be to do a Streamline 203k and have your contractor do the bare minimum to get the home up to FHA standards, and then you can do the rest of the work yourself? Something else to discuss with your lender.

Good luck!