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FHA and "Subject-To" Repairs

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Heathman914

Freshman Member
Joined
Feb 25, 2008
Professional Status
General Public
State
Florida
Scenario: Multi-family property that requires a bit of work including but not limited to a new roof, interior and exterior paint chipping (prior to 1978), missing interior doors, trim repairs, some wood rot…. etc. The seller is providing concessions to cover repairs on the property as they are aware the property needs work. Question: Can a FHA report be completed “subject-to” repairs? With the buyer/seller escrowing the repair funds and completing the repairs after closing? I had a prior client tell me the report should be completed “AS-IS” with the appropriate verbiage stating it does NOT meet MPS with a list of required repairs. I think we're going to complete the report “AS-IS” and list the required repairs. I’m just looking for any input regarding FHA being completed “subject-to.” Thank you in advance!
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Scenario: Multi-family property that requires a bit of work including but not limited to a new roof, interior and exterior paint chipping (prior to 1978), missing interior doors, trim repairs, some wood rot…. etc. The seller is providing concessions to cover repairs on the property as they are aware the property needs work. Question: Can a FHA report be completed “subject-to” repairs? With the buyer/seller escrowing the repair funds and completing the repairs after closing? I had a prior client tell me the report should be completed “AS-IS” with the appropriate verbiage stating it does NOT meet MPS with a list of required repairs. I think we're going to complete the report “AS-IS” and list the required repairs. I’m just looking for any input regarding FHA being completed “subject-to.” Thank you in advance!
Typically, for FHA the appraiser appraises the property " as is" on inspection date, and if there are MPR deficiencies/repairs/health/safety issues, the appraiser makes report subject to inspection or repair but it must be done PRIOR to closing, aka the appraiser has to come out and inspect that the work was done, when lender sees work was done then they can close and fund the loan,

This property may be a candidate for the 203k program, or the seller can fix prior to closing, the fact that they will give concessions to borrower to fix later does not impact.
 

Heathman914

Freshman Member
Joined
Feb 25, 2008
Professional Status
General Public
State
Florida
Typically, for FHA the appraiser appraises the property " as is" on inspection date, and if there are MPR deficiencies/repairs/health/safety issues, the appraiser makes report subject to inspection or repair but it must be done PRIOR to closing, aka the appraiser has to come out and inspect that the work was done, when lender sees work was done then they can close and fund the loan,

This property may be a candidate for the 203k program, or the seller can fix prior to closing, the fact that they will give concessions to borrower to fix later does not impact.

Thank you for the information and quick response.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
Scenario: Multi-family property that requires a bit of work including but not limited to a new roof, interior and exterior paint chipping (prior to 1978), missing interior doors, trim repairs, some wood rot…. etc. The seller is providing concessions to cover repairs on the property as they are aware the property needs work. Question: Can a FHA report be completed “subject-to” repairs? With the buyer/seller escrowing the repair funds and completing the repairs after closing? I had a prior client tell me the report should be completed “AS-IS” with the appropriate verbiage stating it does NOT meet MPS with a list of required repairs. I think we're going to complete the report “AS-IS” and list the required repairs. I’m just looking for any input regarding FHA being completed “subject-to.” Thank you in advance!
FHA- even conventional - A mess- You have a 203K property. Hit C-5 and list what repairs you are aware of but you are not a roofer or termite guys so recommend the lender have a licensed contractor inspect the roof and determine what is needed. The infestation - Recommend a licensed termite inspector inspect and mitigate and finally state the property in it's current condition does not meet FHA- Minimum Property Requirements. It's a cash-Hard money or 203K loan at best. This is not one that with a few repairs can be brought to a C-4 and up to MPR :)
 
Last edited:

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
Agree a 203K. Standard FHA requires all repairs to be completed prior to closing. Also all repair items must be itemized and the lender will want a cost to cure on each. Good luck
 

andrew81

Senior Member
Gold Supporting Member
Joined
Dec 5, 2008
Professional Status
Certified Residential Appraiser
State
Illinois
in my area during the winter months they allow for escrow of some exterior repairs on a case by case basis depending on weather; but always allow escrow of exterior paint.
 

ZZGAMAZZ

Elite Member
Joined
Jul 23, 2007
Professional Status
Certified Residential Appraiser
State
California
Thank you for the information and quick response.
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Does the client notify the appraiser of the 203K loan program or would that be included among the transfer documents that are provided for the appraiser to review?
 

Tom D

Senior Member
Gold Supporting Member
Joined
May 22, 2015
Professional Status
Certified Residential Appraiser
State
Pennsylvania
ordering a 203k, the lender gives you the specs & cost to do the rehab. what i hate about the 203k, and i have built houses, it that in a partial rehab you can get a detailed break down, per sq ft, cost sheets. now you have a bunch of sheets, like a puzzle, to figure out exactly what they are doing. it can be insane looking at a sheet of general titles of repairs items. if it's just the bath, or kitchen, you can understand it. if it's a little of this, and a little of that, a bunch of numbers per sq foot. i have given up trying to figure out exactly how much is being done, and where. it's hard to explain how confusing it is. if you ever get an official HUD segregated cost breakdown, blood will squirt from you eyes. insurance companies sorta do it the same way. and yes USPAP, i do not want to do them.
 
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