Congratulations, you have an accepted offer and are in escrow. Escrow can last from 21 days to 60 days with 45 being average. This is the period where things get serious and your real estate agent really earns their money. It is also the most stressful time in a real estate transaction. But it doesn’t have to be if you are prepared and have written an offer that meets your needs and capabilities. By that I mean what you can afford to spend on repairs if needed and still make sure your lender approves your funding to close.
To avoid delays in the escrow or even the possibility of the contract being cancelled you must know what your lender requires to get you the funds to close. If your loan is an FHA, Freddie Mac or Fannie MAE type loan the lender is going to want the property to be safe and free of health hazards. That means if you had a pest inspection you will need to have a clear report – free of any section 1 items (Termites, termite damage, fungus, wood rot, etc.). To avoid hassles and further negotiations regarding repairs make sure when you are writing your contrat to purchase the property that you include language that dictates who is responsible for the repairs. If you get this settled up front then your escrow will be a lot smoother and less stressful.
Welcome back to my weekly blog. This week I want to talk about FHA financing and buying REO properties. First of all FHA financing is way for buyers to purchase a property without having a lot of money to put down. It requires a minimum 3.5% downpayment and the loan is backed by the government. Its a great way to buy a house for a first time buyer however there are some restrictions. FHA guidelines require that the property be in safe liveable conditions. That means all electrical and water must be working properly, the house must have a clean pest report, no broken windows or doors and if the kitchen has a spot for a stove/oven and or dishwasher then they need to be installed and working. The roof needs to be in good condition and leak free.
That brings me to buying an REO with FHA financing. As I said in my last blog most REO properties are in some sort of disrepair and are sold AS-IS. Getting the banks to agree to bring the house up to FHA standards isn’t easy but not impossible. Once a property has had inspections and some sort of damage or defects has been found it must be disclosed to any future buyers and it is in the best interest of the seller to agree to do the repairs or agree to credit for the repairs with their current buyer. Now if you are using FHA financing, repairs would have to be done in order for the transaction to be completed. Another issue with FHA financing is that there is a case or file # attached to any property in which a buyer is using FHA. That file # stays with the property even if the buyer doesn’t purchase the house. So another reason for the seller to agree to repairs.
So in short, FHA financing is possible with REO properties. Not easy but possible. Knowing these things are benificial when negotiating your purchase of an REO or any other property and I’ll go into that in my next blog.
Thanks for reading!
