How To Buy A Home That Needs Repairs
If you are looking to buy a home that needs repairs, then you most likely have found plenty of opportunities in a housing market that is recording a record number of distressed property sales. But if you are not a cash buyer, then you most likely have also run into some difficulty in figuring out how to finance your purchase.
The days of easy loan programs that could solve these problems is over, and you have to know exactly what to do when you structure a contract to buy a home that needs repairs. Unless you plan on paying cash for the repairs, you must think-through the structure of your offer and communicate clearly with your chosen lender. Not all mortgage loan providers have products to fit your needs, so make sure you address this with your real estate agent before you begin the home selection process.
This is a good reason to ensure that you are working with a well-trained real estate agent, because if your agent is not up-to-date with the most recent lending programs, you will end up either spending more cash out of pocket, or losing the home to a buyer who has the better real estate agent who can structure a deal that can be financed.
Common Issues When You Buy A Home That Needs Repairs
There are so many short sales, foreclosures, and REO properties on the market, that necessary repairs are not uncommon when you select a home for sale in Tallahassee. Often times, these repairs can cost a significant amount of money, so you have to know how they will be addressed in the sales contract, who will pay for them, and which ones your lender will allow to be repaired after closing (by using a repair escrow with your real estate attorney).
Likely Acceptable Items When You Buy A Home That Needs Repairs
Most lenders who allow for repair escrows maintain a list of things that they will allow to be escrowed, and the following list was given to me by Robert Barnette at Hancock Bank. His bank allows these items to be included in a repair escrow when you buy a home that needs repairs.
- Roof repair or replacement
- HVAC repair or replacement
- Replace missing appliances
- Peeling Paint
- Non-structural wood rot damage
- Installation of new flooring
- Repair or replace pool equipment or liners
Non-Allowable Repairs For Inclusion In A Repair Escrow
Here are some common repairs that need to be addressed prior to closing, as most lenders will not allow a closing to occur without these first being fixed:
- Full remodels of kitchens or bathrooms
- Structural damage
- Repairs taking longer than 2 weeks
- Landscaping or yard equipment replacement or repair
- Damages exceeding $10,000 (with the likely exception of roofs and HVAC)
Final Tip On How To Buy A Home That Needs Repairs
After reading through this, you can see that experience matters! Choose your real estate agent and your mortgage lender before you start looking at homes, that way you will have a prepared team working for you should you decide to buy a home that needs repairs. If you plan on buying a home in Tallahassee, just drop me a note and we’ll schedule a time to meet and get you started on your way.11 September 2013