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Buying a foreclosure or bank owned home using FHA? What you need to know about FHA (or VA) repairs

June 6th, 2011 · No Comments · Appraisals in Macomb County MI, fha mortgages and first time home buyers, tips for home buyers, tips for purchasing a foreclosure

One of the most frequent issues that I run in to while representing a home buyer in my area (Macomb County, St. Clair County, Oakland County) is the fact that so many homes are foreclosures (bank owned) and my buyer clients are using an FHA or VA mortgage.

FHA has what I term “health and safety” standards for the homes in which you can purchase using this mortgage product.  The FHA appraiser will look for things such as:

  • Flaking or peeling paint in a home built before 1978.
  • Adequate drainage away from the home (to prevent water leaking in to the home and/or settling and foundation issues)
  • Trip hazards in concrete
  • A roof with an adequate life span left
  • Electrical service that is safe and adequate

This list is not the full list, but you get the idea.   One of the issues though is this:  A foreclosure is “as is”.  Most banks or asset managers will not make the repairs to a home that are needed to pass FHA (or VA) standards.   You have to be diligent and make sure during your purchase process that you will be allowed to make any necessary repairs (if they are minor) or be willing to walk away from a home if the repair list cannot be completed before closing.

Here is a photo of what a typical repair could look like that you may be able to do yourself prior to closing in order to satisfy FHA or VA.   Note the flaking & peeling paint around the window of a garage. We were able to take a couple of hours on a weekend, scrape the loose paint off and re-paint around the window.

Flaking & peeling paint and FHA mortgages

The appraiser then came out to the home to re-inspect the window, and updated the underwriter that things were done correctly and my client was able to close on their new home.

Talk to your buyers agent about these potential issues & repairs as you are viewing homes. Many of them can be corrected so that your purchase can be a smooth process.

Kris Wales – A partner for your real estate needs in Macomb County MI
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Important copyright information: All photos were taken by Kris Wales. Do not copy and use photos for your own use, whether it be for personal or commercial purpose. All articles were written by Kris Wales. Once again, do not copy and use for your own purposes. Important disclaimer: Views expressed on the blog by the author and commenters do not express the views of Keller Williams Realty. All information contained is deemed to be reliable at the time of posting but not guaranteed.