When inquiring about a specific property that is in need of major "cosmetic" repairs/ replacement:

*drywall damage

*holes in interior doors

*tile missing in shower

*disgusting rugs

*peeling vinyl flooring

All things we have experience in replacing, however would this affect the possibility of getting a conventional or VA loan due to the clause "No major issues affecting safety, soundness, and habitability"?

Thanks!

This will be a good conversation to have with your lender. Is this a purchase for you, or a client? Personal or rental? Money talks and when you're putting down 20% I can't see why there would be any issue...at least not with my lender here in CO. Now a VA loan is a different matter; VA appraisers have flagged some very mundane things for clients on mine in the past....

@Mike Giallanza The property is for myself and husband to do a live and flip. My lender is the one who mentioned the clause however it seems too vague and was looking for clarification with possible specifics.

The lender is a direct underwriter for VA loans, is that an advantage?

Thanks for your reply!

All of the items mentioned are cosmetic and would not interfere with the habitability or the property and thus, should not affect your loan, but do confirm with your lender by sending photos of the issues along with the good photos of the home. They do require working kitchens with working stove and heat source for home.

@Will Barnard   Thank you for your advice.  Our lender didn't ask for pictures when I mentioned the condition of the property; I will ask him directly to try to prevent a surprise down the road.

Do you know if the appraiser will ask to see a copy of the inspection report?

IMHO lenders shouldn't be recommending a clause to put into a contract; only an attorney should do that. The VA part only matters if you're using a VA loan. But it really comes down to the appraiser, not the lender and underwriter.

This actually sounds all cosmetic. FHA might make you fix it, I don't know, but I don't think so. The lender normally informs us of what needs to be fixed. I would take the advice in the thread about sending some pictures to see if anything is affected by the cosmetic damage.

Couldn't you just request a cosmetic credit to fix these things?  Most sellers are happier to fix the property themselves than to give you extra money.  This doesn't sound outrageous to fix.  $12/ft2 for industrial carpet in my area, $100 a door, $300-500 to fix the tiles and drywall from an agreeable handyman.  These are all for the western suburbs of Chicago, but maybe your prices are different.  I think the last property I had like this was 1500ft2 and our credit was about $2000.  Wasn't a dealkiller for us.

@Justin Abdilla Thanks Justin. This seller is very hands off and doesn't want to repair anything which is ok with us as long as the sales price reflects that. Inspection tomorrow so we will have a clearer idea of the true condition.

Besides a kitchen, the other thing that has come up for us even with conventional financing is there has to be floor coverings.  We tore carpets out in one house and the lender had a problem with that because the second loan hadn't closed. 

Originally posted by @Julie Berks :

@Will Barnard  Thank you for your advice.  Our lender didn't ask for pictures when I mentioned the condition of the property; I will ask him directly to try to prevent a surprise down the road.

Do you know if the appraiser will ask to see a copy of the inspection report?

 I have not had any appraiser ask for an inspection report but it is certainly possible they may in other instances and/or locations. For this instance, I don't see why they would. I typically will "help" the appraiser do their job by bringing valid comps with details on each comp as many appraisers come from out of area at times and are not familiar enough to do a proper job so it is often up to the investor to make sure the job gets done right. So often the number will come in too far off and it is mostly because of their lack of knowledge of the area.

@Colleen F. Thanks for the heads up.  There are floor coverings somewhere beneath the dirt, dust, furniture.....haha.  It will be so satisfying to rip it out (after we close)!

@Will Barnard Yes working on the comps right now.  This is an off market deal with no real estate agents representing so I am gathering information from the tax assessor website.  I appreciate all of you help!

For comps, you are going to want to have an agent run a CMA for you to give to the appraiser.

The real answer is "It depends". Most lenders will review the appraisal and depending on the comments may send someone to do a pre closing inspection. Then they may give you a list of items that have to be repaired prior to closing. I purchased a house a few years ago. One bedroom had a missing rug and the lender required a rug installed prior to closing . 3 days prior to closing we hand laid a rug and nailed it down in 4 corners. The day before settlement the lender re inspected. The inspector said "The lender said install a rug, they don't care how well it's installed"