What to do when repairs exceed $5,000

[ROBERT JONES]

I can not locate anything on this & I have never experienced this as a smart agent would steer the buyer away from FHA 203b financing. The condition of the subject is a complete mess from basement to attic. I seem to recall seeing a mention someewhere that when the subject is this bad you are to stop and return the report unfinished?

I would just like to see this from a handbook reference before contacting client.

 

[Mike Kennedy]

At What $ Amount & No. of Repairs Can You Reject Property ...

appraisersforum.com/archive/index.php/t-189878.html
17 posts - 11 authors - Sep 3
The property I'm appraising is an FHA and has a list of repairs as long as my arm. Most likely in excess of 10 to 15K on a $125,000 property, there's also excess land yippee. ... With repairs over $5,000, it will have to be a 203K. .... and no reason it would HAVE to go 203K (unless buyer was financing repairs.

1. [PDF] REAL ESTATE OWNED PROPERTIES - HUD
   
   portal.HUD.gov/huddoc/preo_10-24-12.pdf
   File Format: PDF/Adobe Acrobat - Quick View
   ML 2000-27. ❖ Appraising and Financing HUD REO Properties with FHA- ... INSURABLE WITH REPAIR ESCROWS-repairs of $5000 or less as determined by ...
   
   
2. 
   
   [DOC] 4240 - HUD
   
   www.HUD.gov/offices/adm/hudclips/.../hsgh/.../42404c6HSGH.doc
   File Format: Microsoft Word - Quick View
   eligible for insured financing under Section 203(b), needing a. minimum $5,000 in major repairs (and/or eligible improvements as. listed in paragraph 1-7), are ...
   
   
3. 
   
   [PDF] FAQ from REO Webinar on October 24, 2012 - HUD
   
   portal.HUD.gov/huddoc/preo_faqs_10-24-12.pdf
   File Format: PDF/Adobe Acrobat - Quick View
   Oct 24, 2012 – When ordering the case number in FHA ... In cases where the appraisal has expired or the contract was not ratified within the appraisal .... If the UFMIP exceeds the appraised value, then it cannot be financed and the borrower must bring the ... A: The cost of repairs on the 203b program is limited to $5,000.
   

203k FAQs | Frequently Asked Questions for the FHA 203k loan ...

www.203kcontractorsillinois.com/FAQs
What types of repairs and/or modifications are acceptable for an FHA 203k Loan? ... An FHA 203k loan permits homebuyers to finance repair/improvement ... $5,000 up to 110% of the improved appraised value) & the Streamline (work is less ... in excess of $35,000 are NOT allowed for the FHA 203k Streamlined Loan, but ...

repair escrow proceduresm - Michigan Mutual, Inc

home.michiganmutual.com/.../FHA/FHA%20repair%20escrow%20p...
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Apr 1, 2009 – Properties that require no more than $5000 of repairs to meet FHA's minimum property requirements appraised in “as is” condition under Section 203(b). .... for sale with insured financing available, provided a cash escrow is established to ensure the ... maximum escrow amount may not exceed $5,500.

 

[Mile High Trout]

With HUD direct, they segregate these offerings, with the three different statements on insurability. insurable without repair. insurable with 5k or less, or uninsurable. That about says it. If it's uninsurable, that simply limits the buyer pool because it needs to transfer on special warranty deed and probably won't be financed to your normal joe.

Call it like you see it. Tally all repairs. Subject to if they insist on financing like a turn key home. Let the lender sort out all the financing issues. They are free to order a cost analysis an as is, and an as repaired after subject to repairs. The sky is the limit. You don't have to stop and inform them, unless that's a specific scope for that particular lender. Work up that damage list to cure all health and safety issues.

Not to long ago I tallied one out at 80k of repairs. Value left was 40k ish. Almost went value less, actually, but even though the subject was not necessarily a viable offering, the market still was viable with apparent margins to predict refurbishment would be something an investor may be interested in with a damaged home. So basically it was land, and some home value, but most of the comparative market value was lost due to excessive damages uncommon to the typical comparisons. Net gross was like 60/80 man, and that was gross. But it was an appropriate grid workup because net/gross appropriately indicated the dissimilarity against the average offering. It's not your fault if the home is literally falling apart.