Getting my hands on an inspection report... Possible?

Question

Hi BP Community....

I've had my eyes of a duplex in DFW for a while. Two offers have fallen through due to financing. I know that it has something to do with the inspection or appraisal. But I don't know what specifically. I have two questions.

1) Short of knowing the buyer/seller, is it possible to get a copy of the inspection report so I know where things can go wrong getting financing for my first home?

2) My realtor is concerned about my desire to go through the FHA for a loan... given that they have strict property condition requires in order for the loan to be secured by the government. Isn't this what a 203k loan is for? What problems will a 203k loan not  cover. Buying my first home this early in life definetly hinges on getting a 203k loan. I do not want a deal to fall through because I find out last min. that the FHA doesn't like the condition of the house?

Any advice appreciated!

John Warren · Answer

@Austin Bright although the 203k loan may seem like the magic bullet for buying distressed properties, they are notoriously difficult to do unless you already have a great contractor lined up and your scope of work is bullet proof. In addition, FHA has this tricky little thing called "self sufficiency". Ask your lender more about it. It has killed many 203k deals clients of mine wanted to do in the past.

Poem Turner · Answer

@Austin Bright - In Texas, if the seller has an inspection report, received or purchased by them, within the last four years, they are required to share it with any prospective buyers. If the previous would-be buyers shared their inspection report or information regarding any major issues or repairs needed on the duplex, the sellers are required to disclose that information to you. In practice, this is very difficult to enforce, and comes down to honesty, transparency and ethics. But you and your agent would be perfectly reasonable to request one from the seller. And if your agent is unaware of this or doesn't want to ask, consider finding another agent in your area who can help act in your best interest.Do you have a lender yet who you've discussed 203k renovation loans with? They do sound good, but can be challenging. First of all you have to outsource the work, you can't do it yourself. They don't cover structural corrections (foundation, etc). You are limited in the number of contractors you can hire (not usually an issue if you vet your hires). There are different allowances for the FHA 203(k) and the standard 203(k) and the VA 203(k) - some allow appliances, some allow fences, some require a HUD consultant.

If you want a recommendation for a lender who handles these loans, let me know. The folks at SWBC will come alongside you throughout the renovation process and have a database of contractors they've already vetted and approved.

Regarding appraisals, most 203(k) lenders will appraise based on the ARV of the property, so that at least works in your favor :-)

Good luck!

Austin Bright · Answer

@Bruce Lynn When your talking about appraisals, are you saying the seller is asking for a price higher than the appraisal, so the bank won't issue the loan? What is makes it hard to get around this? Can't negotiations on price just continue until you come to the appraised valye?

Bruce Lynn · Answer

@Austin Bright   203k does not cover structural issues as far as I know.  More or less it can cover cosmetics....also the property has to appraise...so price has to make sense.   It's tough to find properties now where that is the case....possible, but not always easy.  If the inspection reports were given to the seller, they need to share them with you.   You can have your agent ask if they got them.  Otherwise might be tough to know who the inspector was and what was in the report unless you know the buyer.  One trick might be to look under the kitchen cabinets and see if there was a termite inspection.  Some inspectors also do termite inspections and there should be a sticker to note the inspection, or in some cases they hire a 3rd party termite inspection and that person might could refer you back to the home inspector that contracted them to do it for them.

Austin Bright · Answer

@Mike Cumbie My reasoning in going for the 203K loan is that I only have 10-13K for a down payment and closing. Are there ways I can mitigate the risks you mentioned? Or is there alternative financing routes I can take? This would be my first home. Thanks!

Austin Bright · Answer

@John Warren It looks like the rental income must cover the mortgage....Do you know what problems a 203K loan will not cover?? What about a property could cause this financing to fall through?

Michael Dang · Answer

Ask the listing agent if you can obtain the inspection report from the buyer or ask who the inspector was.  If that isn't possible, ask the listing agent questions regarding the property condition and what lead to the buyer withdrawing?  Can't hurt to ask.  It maybe enough information for a decision.

Mike Cumbie · Answer

If you happen to know who the other buyers or their agents were you can usually call and offer them a few bucks. You are literally the only person on the planet with an interest in that document so they usually are apt to sell. Sometimes your agent can ask the other agent. If it was a pretty clean report they like the idea of not going through another one. If it was an inspector who they completely disagreed with they may not.

As far as 203K goes, it's not a "blanket amount of money" that they agree to. Basically you need to get bids on the work you need done (before applying for the loan). You can not do any of the work yourself (or hire handypersons to do it). You need to get licensed and insured contractors that are willing to get paid after the work is all done and signed off on. Honestly the mountain of paperwork and documents they have to provide is quite extensive. That being the case no contractor in their right mind is "cutting you a good deal" on a project months away that they get paid weeks/months after they do it. Then the bank hires a person to verify that it's a fair price (fair being high enough, not low enough). I am not a huge fan of it because the buyer gets taken for a ride all across the board.

As far as FHA itself it's a good program. However if it fell through due to that the seller won't even really entertain your offer. The appraisal sticks with a property for 6 months. So if that was the problem you will know pretty quick.

Good Luck!

Getting my hands on an inspection report... Possible?

Most Popular Reply