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By Tammy Engel
Mortgage Advisor 

Ugly but not broken

Mortgage Matters


Lately we’ve been seeing appraisals come back with commentary requiring repairs be made before the close of escrow. What triggers this situation?

Generally houses need to be free of “health and safety” issues in order to be finance-able. And, a reasonable buyer wants a house that is safe and secure and free of major defects. There are two stages in a normal purchase.

During the course of buying a home, the buyer usually hires a home inspector to comment on the condition of the home. This entails a multi-hour inspection and a voluminous report about all aspects of the structure. Buyer and Realtor review the report and decide if they will ask the seller to fix anything before closing.

If the buyer is getting a loan to buy the house, the next step is the appraisal. The appraiser’s job is not only to evaluate the current market value of the home, but also to comment on the condition. Lenders want this information to be sure the collateral underlying their loan is sound.

For some loan types, the appraisal inspection is mostly visual. When the appraiser notices something amiss, the typical report comment is something like “hire a licensed professional to see what’s really going on.” So if there are curled roof tiles, the appraiser might call for a roof inspection. If the grass is squishy they might call for a septic inspection. If wood is visibly disturbed they might call for a pest inspection. Water stains mean a plumber may need to inspect and comment.

Appraisers are also looking to be certain the house has working smoke detectors, working carbon monoxide detectors, and double straps on the hot water heater.

When government loans are involved (USDA, FHA, VA), the appraiser is supposed to test the systems of the house as well. Utilities need to be on so they can run the faucets and test the electrical outlets.

Any of these situations can mean the appraisal is written up as “subject to” repairs. For example, “the value is $250,000 subject to strapping the water heater and installing a CO detector.” Usually the stated repairs must be completed before any loan can fund.

Another condition we’re seeing more of lately is about peeling paint. Exposed wood makes the house more susceptible to pest infestation and so it’s being called as a mandatory repair.

The general rule of thumb is that when you’re getting financing to buy a home, the house can be “ugly but not broken” to qualify for the loan. Maybe it doesn’t look like the mansions on HGTV, but it could still be your new home sweet home.

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.


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