Lender required repairs are one of the more challenging things sellers need to tackle. However, if you’re putting your house on the market, you’ll encounter it sooner or later. That’s why knowing about lender required repairs is essential for any homeowner. This article can get you up to speed with them as we discuss what they are and what to expect.
We’ll also look into an excellent alternative so you can avoid this requirement entirely.
What are Lender Required Repairs?
Lender required repairs, as the name suggests, are the list of issues and problems that the homeowner needs to address before a lender can release a loan to the buyer of that home. It’s one of the requirements when getting a Federal Housing Administration (FHA) loan.
You would be wondering why the lender has a keen interest in the condition of the house, and the answer is simple. In the event the buyer fails to pay the loan, they need to ensure that the property (which is often put as collateral) is valuable enough to recover their losses from the non-payment of that loan. Hence, why most lenders require a home inspection.
What fixes are mandatory after a home inspection can vary, but they often involve structural, health, and regulatory concerns. A renovation without a permit, for example, is of prime concern to lenders. Aesthetic features, such blemishes due to wear and tear are usually not considered by lenders when appraising a home.
Examples of Lender Required Repairs
Lenders of FHA loans are notoriously strict when it comes to lender required repairs. Typical FHA required repairs involve a long list of items, from peeling paint for very old homes to exposed electrical wires.
Some examples of appraisal required repairs include health hazards like defective fire alarms or carbon monoxide detectors. These are usually against government regulations, so, understandably, lenders are often strict with them.
Building code violations are another common conventional appraisal repair. Lenders don’t want to foreclose a property later on and deal with the government on such matters; hence, why they’re reasonably strict with these as well.
If you expect to get an FHA loan with foundation problems at your house, think again. Structural issues like these are some of the most significant factors lenders and appraisers look at. Signs of a weak foundation are a big red flag.
FHA appraisal repairs go beyond what we’ve covered here, and in theory, can include any fixes the lenders see fit. Remember that the goal is for the lender to get a positive return on their investment and ensuring that the collateral property has fair market dollar value is vital.
Common Questions About Lender Required Repairs
In FHA appraisal repairs, who is responsible for paying for them?
It depends on the agreement between the buyer and seller. The buyer might offer it, but often, the seller will bear the brunt of the cost, since they have an incentive to close the deal as quickly as possible.
Sometimes, the offer contract will stipulate how repair costs are split between the two parties.
How do lenders assess your property?
Since they are not appraisers themselves, lenders usually rely on reports submitted during the house inspection. They can also base it on any disclosures made by the seller upon listing.
As a seller, it’s beneficial if the report comes back as favorable with little to no repairs required.
Do you need to do lender required repairs?
Technically speaking, you’re not required to do lender required repairs. You can strike a deal with the buyer and sell the property at a lower price. Alternatively, you can also throw in incentives like home warranties on the table.
Most buyers can’t afford a full house payment without resorting to a loan. If this describes your buyer, then lender required repairs are, in effect, mandatory.
How to Avoid Lender Required Repairs
Lender required repairs can be stressful for sellers, because FHA loans are notorious for being strict, and as a result they will increase your closing costs. Lenders can list in any repairs they wish, which can sometimes be unnecessary.
Unfortunately, if you’re selling a house the traditional way (direct to the buyer through a realtor), lender required repairs can be unavoidable. More often than not, your buyer is taking out a loan to fund their purchase.
The safest, foolproof way to make sure you avoid lender required repairs is to sell your house for cash through 365 Property Buyers.
Our approach is simple – we assess your house as-is and give you a fair cash offer for it. We won’t ever require you to do unnecessary repairs on your property. You don’t even need to hire a realtor. We are the easiest way to sell your house fast.