By Tammy Engel
Mortgage Advisor
Negotiating repairs
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Of course there will be things wrong with your dream house! The home inspection is designed to tell you that upfront so you can be an informed consumer. What do you do with those findings?
Your Realtor is your main advocate when it comes to negotiating for repairs. You’ll review the home inspection report together and make a list of things you’d like the seller to fix. I’m here to beg you to keep your loan officer in the loop. (Heehee! That would be “me” – your loan officer in The Loop!)
Your purchase contract spells out what inspections will be a part of your escrow period, and the home inspection is usually done first. Pest inspections, septic inspections, and roof inspections may also be indicated in your contract. Each of these reports should be shared with your loan officer as soon as they come in. We care deeply about how they turn out.
Many government loans (FHA, VA, USDA) require clear pest and septic in order to close. Some conventional loans do not. If the pest or septic reports are a mess, and you as buyer are okay with it, sometimes the report and clearance can be waived. Otherwise the seller needs to fix the identified problems.
Trouble arises when you start trading actual repair for money. Most loans do not allow for “cash back” to the buyer, so you need to be strategic in how you structure this exchange. Usually we instruct you to ask for the seller to credit the buyer towards closing costs instead. This allows you to spend less money at closing, and to use those saved funds to fix the house after. Be careful not to ask for a credit bigger than your actual closing costs.
Real estate appraisers are hired not only to determine the current market value of a home, but are also looking for “health and safety” issues. When an appraisal comes back “subject to repairs”, there is usually no getting around it. To boot, the buyer is usually the one who gets charged for the appraiser to go back to the house and make sure the items have been fixed.
This comes up with almost every home purchase, and your local Realtor and lender are versed in what to do. Just please be sure that everyone in the transaction (let’s include your escrow officer here, too) is in on the plan so your loan closes on time without big drama.
Tammy Engel is your local Mortgage Advisor, and has been working for your best interest since 1990. Contact her at 661/822-7325 for help with purchase, refinance, and reverse mortgage. And have a happy day! NMLS 235051 CaBRE 02173839
