Mistake on FHA seller concessions

[Carnivore]

Simple answer is NO! Reason is the Appraiser made the Appraisal Report "Subject to the Repair" means the Appraiser already factored in the economic factor of the new Roof versus what it was "AS-IS" with old roof. This new roof is a Hypothetical Improvement to overall condition of the Home on the date of inspection/effective date. Even Though it occurred after the Effective Date of the Appraisal.

The reason the Appraiser made it 'Subject To', is to inform the Client/User of the report the Market Value opined in the Report is conditioned on that Repair being completed. It is a Hypothetical.

Assuming the Appraiser used the current FNMA series Report the words "Subject to" Block says more than just "Subject To" See below; Hope this was helpful
View attachment 48121

So I have Quoted my Own Post Above to delve further into What is a Concession and What is not a Concession when it comes to Closing Cost as it relates to the Appraisal Process and ACTIVE LISTINGS YOU THE BROKER MAY HAVE. This is where it can get a little confusing to Realtors in Regards to Loan Closing cost of the Buyer.

In Higher Priced Homes this is not very often a Problem. Actually in my area above $300K its almost never an issue. Simply because these buyers very rarely ask a Seller to pay the Buyers Closing Cost.

In lower priced homes, Most often Entry level 1st time buyers, especially FHA/FMHA/VA Loans buyers often ask the Seller to Pay the Closing cost of the Buyers Loan; usually 3-4% of the Loan amount.

The Tricky part is Simple to state. Let use a listed home $100,000 dollar List Price.

1. Seller "A" list home with you at a $100,000 and in the Listing they agree to pay 3% of the Closing buyer loan cost. = $3,000. Lets say in your market that is not unusual, for that matter its Common. So you list it at $100,000.

The House goes under Contract $100,000 and seller agrees to Pay $3,000.

The House closes and the Appraisal MV coincidentally was $100,000. One Reason is the Appraiser had a Comparable sale that sold a month earlier $100,000 CASH.

2, Seller "B" has a Home in same Hood, both are identical, they look like Identical Twins. Seller B list with you also at a $100,000 BUT has not Agreed to pay any Buyer Loan Closing cost. You don't state in your Listing that fact.

As stated above House #1 Closed.

Soon after that you get offer on House #2

Here is where it gets Tricky. You get an offer from you your Buyers who offer $100,000. But want the Seller to Pay $3,000, The Seller counters with $103,000 and they will pay the closing cost. The Buyer agrees. So you raise the List Price to a $103,000 in the Contract and the Seller agrees. Buyer tries to get Loan based on $103,000.

Question: If House #A sold for $$100,000 Is House B worth $100,000? or $103,000?

 

[Carnivore]

Its FHA and they do not waive roofs inspections or repairs

Crap, i did not pay attention to the OP specifically FHA. :-(

I was thinking in general terms of how we deal with concessions and repairs.

 

[Tim Hicks (Texas)]

My question is "why isn't the new roof a part of the sales contract?" Then the appraisal should be made "subject to." Just stating a new roof is going to be installed is no guarantee it will be done. It should be part of the contract.

 

[glenn walker]

My question is "why isn't the new roof a part of the sales contract?" Then the appraisal should be made "subject to." Just stating a new roof is going to be installed is no guarantee it will be done. It should be part of the contract.

It's a clown show and it will be resolved - Or the seller can -cancel escrow and start the Dog & Pony show all over again . Until someone steps in who knows what they are doing it's just not going anywhere and no advice or council will help anyone.