Let’s face it: when buying a bank owned property, many times there are repairs that are going to be needed to the property.
Sometimes, a significant number of repairs.
If you are planning on financing a home that is currently owned by a bank and in need of repairs, one important thing to be aware of is which repairs will be required by FHA and which repairs will not be required prior to close by FHA.
Here is a list of repairs that — if the property needs it — will be required by FHA to be repaired prior to the loan being eligible for FHA insuring.
- All windows and window bars must working and have proper release latches and/or locks.
- All smoke detectors must be in working order.
- Inadequate access/egress from bedrooms to exterior of homes.
- Any missing shingles or roof tiles must be replaced by a licensed contractor and have a roof inspection done.
- If there is any evidence of structural problems, these must be fixed. Items such as visible foundation or ceiling cracks, missing, cracked, bubbled out or discolored drywall, dry rot, damaged outlets, damaged or missing home exterior must all be repaired.
- Due to lead based paint being used prior to 1978, any interior or exterior surface that has peeling paint that was constructed pre-1978 – the paint must be stripped and repainted.
- Lastly: “If the appraisal reports a potential property deficiency that may pose a threat to the safety of the occupants or the security and soundness of the property the lender will require an inspection of the condition to determine whether repairs are necessary to resolve the problem.”
Some of the somewhat surprising issues that are not required to be repaired by FHA in order to be eligible for FHA financing include:
- Missing Handrails
- Cracked or damaged exit doors that are otherwise operable
- Cracked window glass
- Any peeling paint or defective paint surfaces for any home built after 1978
- Minor plumbing leaks (such as leaky faucets)
- Defective floor finish/covering
- Evidence of previous (non-active) wood destroying insect/organism damage
- Rotten or worn-out counter-tops
- Damaged plaster, sheet-rock or other wall and ceiling materials in homes
- Anything that is generally considered “poor workmanship”
- Any trip hazards
- Any debris in the crawl space under the house
- Lack of all-weather driveway surface
All of these issues (according to FHA) are considered “cosmetic” and hence, not required to be repaired prior to close.
So if you are in the market for buying a home — particularly a bank owned property — it can be very important as you walk through (before you get the appraisal done which will also note these items) which items will be required to be repaired prior to closing and which ones FHA considers “cosmetic”.
And perhaps you were as surprised as I was to learn that as long as the latch on the bars on the windows was working, it didn’t matter that the window behind it was cracked.
