January 20, 2017
Few, if any, houses are in perfect condition, even at the time of sale. While many buyers are willing to overlook certain defects when purchasing a home, some lenders (including the United States Fair Housing Administration, or FHA) may require repairs before agreeing to fund the buyers’ loan.
Are Lender-Required Repairs Mandatory?
Generally, yes, in the sense that any lender-required repairs are conditions to funding of the loan. This means that the lender does not fund the buyers’ loan, and the seller does not get the purchase money, unless the repairs are made.
Most people can’t afford to buy a house without a loan (sometimes called “purchase money financing”),so lender-required repairs are mandatory for the sale to close.
How Do Lenders Learn About The Need For Repairs?
Lenders normally receive a copy of the appraisal report
, which contains information about the condition of the property being sold. Lenders may also receive a copy of any disclosures provided by the seller, including disclosures relating to the property’s condition.
What Kind of Repairs Do Lenders Require?
The type of repairs a lender may request depends on a number of factors, including the size and type of loan, the lender’s business preferences, and the overall condition of the house in question.
Structural issues, like problems with a roof or foundation, and termite infestations often trigger a request for repairs from conventional lenders
(generally, banks and mortgage companies). Conventional lenders rarely ask for repairs aside from these issues (although it can and does happen in certain areas or with certain types of loans).
Loans obtained through the United States Federal Housing Administration
(commonly known as the FHA) typically have far more required repairs than loans obtained through a conventional lender. FHA loans are subject to a number of government guidelines, including repair guidelines
, that must be complied with before the loan can fund and the sale can close.
FHA lending guidelines typically require the seller to repair any issues that negatively impact the house’s structural integrity, as well as conditions that create health and safety risks for the buyers and their families. After reviewing appraisal and inspection reports, the FHA lender (or representative) will provide a list of conditions and repairs that must be completed before the loan can fund.
Who Pays For Lender-Required Repairs?
The short answer is: it depends
Sometimes, the sales contract signed by the buyer and seller dictates who will pay for certain kinds of repairs. When the contract is silent (meaning its terms do not resolve the issue) the parties normally negotiate who will pay for mandatory repairs.
However, the loan does not fund if lender-required repairs are not made, so sellers often agree to bear a large portion of the burden to ensure the sale will close.
If you don’t want to worry about lender-required repairs, consider selling your home to 4 Brothers Buy Houses
instead. We never ask for repairs, and buy for cash, so there are no lender contingencies.Click here for a free, no-obligation quote and more information.