New to Real Estate · Texas Christian University · Member since 2022 · 119 posts · 56 votes
BP community I have recently ran into a roadblock with my FHA requirement. This morning I viewed an investment property to house-hack. The listing agent told me that the house would not pass the appraisal/inspection. This house needs improvements.. I would not possibly be able to finish any fixes that could be flagged during the appraisal/inspection. My lender did not mention any information regarding the stability of the property. Is this true?
Thats the issue when using FHA product. The home needs to meet their guidelines what they consider livable property as that what that product is intended for to buy your primary home with low upfront down payment. The lender should have advised you on this scenario. You might have to switch to conventional or look for another property that will pass FHA inspection.
Its frustrating to say the least. FHA Loans do have requirements that a lot of times don't pass appraisals. the biggest one that I run into the most is peeling and chipping paint inside and out. if the home has any of it, it will not pass inspection. sometimes it is over looked but a good appraiser will see it and call it. A lot of times the Seller doesn't want to fix those problems before they sell or its just too much for them to get done. You could with the sellers permission fix the problems before appraisal is done but then you risk fixing something for someone else then not being able to close on the deal or the appraiser calls something else out that you didn't foresee.
Thats the issue when using FHA product. The home needs to meet their guidelines what they consider livable property as that what that product is intended for to buy your primary home with low upfront down payment. The lender should have advised you on this scenario. You might have to switch to conventional or look for another property that will pass FHA inspection.
Its frustrating to say the least. FHA Loans do have requirements that a lot of times don't pass appraisals. the biggest one that I run into the most is peeling and chipping paint inside and out. if the home has any of it, it will not pass inspection. sometimes it is over looked but a good appraiser will see it and call it. A lot of times the Seller doesn't want to fix those problems before they sell or its just too much for them to get done. You could with the sellers permission fix the problems before appraisal is done but then you risk fixing something for someone else then not being able to close on the deal or the appraiser calls something else out that you didn't foresee.
Give me a call if you have more questions!
Thank you Aaron for this information. I will defiantly reach out if I have any more questions. You are now in my contacts. Have a great day!
@Hunter Reed thanks 1) you cant use FHA loans for inv property 2) what are the details that leas the listing agent to beleive it wont pass appraisal ? ( unless its a safety or helath issue - it might be OK ) ...3) issues noted by any appraiser will need to be completed before any loan can close ( unless you get a lender approval for an escrow holdback ) 4) can seller or agents contribute to have repairs done/ aid for ? good luck
Dave, the listing agent explained to me that the property would not pass inspection because chip paint, insufficient windows, insulation problems, minor plumbing issues etc... After the showing I followed up with my lender and they basically said the same thing. I wished the lender would have informed me before on the issue. The seller wants to sell the property as is. The seller will not be responsible for any repairs pryer to closing. I will now be searching for property that is rent ready as is. What are some other issues with properties that could be flagged during a FHA inspection?
Think of an FHA appraisal/inspection as safety hazards. If its a safety hazard or could be a detriment to health/safety, then it will be a problem with FHA guidelines.
Chipping paint, hand rails missing or broken, windows not sealed properly or broken, insulation fallout, mold, termite infestation, cracked foundation, moisture or leaking roof, heating and electric not working and not up to code, etc...
If it's unsafe or a hazard, then FHA will flag it. Some fixes are easier than others and you would just handle that as part of the inspection and due diligence period. Buying a "Fixer Upper" with an FHA loan is not a great idea and I wish all these Guru's would stop talking like its so easy to do.
Unfortunately with the FHA loan that is one of the major drawbacks. If you are looking to use the FHA loan, but still force some appreciation I would look for ugly properties with good bones. Stuff that is cosmetic, but not a safety concern. Happy hunting!
Thanks for the details - if no parties would be able to fix/ pay for these issues before closing - then it’s prob good idea to move on to another home ….. can you consider using a conv loan as the appraiser may be more lenient ? The issues you outline seem minor …maybe offer seller a few thousand more on offer and ask for them to fix ? Or ask agents for credits to help offset cost?