Friday, January 16, 2009

As Is? Not Always.

This is a follow up to yesterday's post explaining how buyers using an FHA loan to purchase a foreclosure ("REO") home can often get the bank which owns the home to make repairs, even when the home is advertised as "As Is".


One of my favorite loan officers, Jeannie Bolger of Nova Home Loans reports she's recently closed a series of FHA loans for various buyers in which the REO companies replaced the roof, or added an A/C unit because the previous one was missing and presumed stolen.  (You can reach Jeannie at 602-550-8674 or JeannieB@NovaHomeLoans.com)


She and I are currently working with a first time homebuyer on an FHA purchase on a house with some significant items that need attention. Exhibit A, these pictures of the back patio.


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The back patio seen from below.


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The back patio seen from above.


Clearly, the former owner added a covered patio. Those are holes in the stucco where the patio attaches to the back of the house, and exposed wires where lights and ceiling fans can eventually be installed. The whole thing was built really well - structurally sound and correctly done. It just was never finished. The wires were left exposed and the top of the patio is just plywood without covering shingles.


Even though the house was advertised as "As Is" and my buyer signed an As Is Addendum and a Fannie Mae Addendume that specifies no repairs will be made, we went ahead and asked for these and a few other health and safety type repairs. We couched our request for repairs in terms that made it clear we felt our FHA loan appraisal would be in jeopardy if these items were left undone. (That is in fact, true. We weren't trying to get something for nothing, so to speak.)


The deal's not done yet, but my loan officer and I are pretty confident that the owner, Fannie Mae, will go ahead and comply with our request to fix these issues in order to get the FHA loan funded. The bank's way better off spending a little money now to make repairs, than letting my buyer walk away and putting the house back on the market. Who knows how long it will sit empty, waiting for a new buyer? Who knows how much further prices will fall while they wait?


"As Is" doesn't always mean the selling REO company won't make repairs. For buyers using an FHA loan, you just have to know how to ask.