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Assistance with housing question...

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Anonymous
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Assistance with housing question...

So here is my dilemma. Hopefully someone can shed some light.

 

My wife and I are looking at this particular house. We are FHA buyers with 10% down and we are in a pickle, sort of. My wife loves this particular house. It is in the neighborhood that she grew up in and it is on a street that she has always wanted to live on. We go to the house and find two things:

 

1. The roof sucks. It will never pass FHA apprasial

2. The seller is a FSBO and is way over the top on his price

 

His price is $144,900. The problem is my realtor believes that the house will only appraise for $135 and the roof will have to be done before closing. Due to the realtor saying it will be only $135k, we can't get a loan for higher that that. We are doing the 6% seller concessions also. So what are my options? This is what I think:

 

1. Can I have him do the roof out of his pocket and then give him a 6k credit at closing to essentially pay for the roof? Will the bank balk at this?

 

2.  Can we go halfers on the roof? 

 

My wife and I really want this house, but I don't know how to approach it. What I think the issue is this guy has 4 kids and no money to do the roof out of pocket. I only have x number of dollars in the bank and the 203k loan won't be an option cause of the apprasial issue above. Am I out of luck?

 

Thanks.

Message 1 of 7
6 REPLIES 6
Anonymous
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Re: Assistance with housing question...

First thing I'd do is spend $300-$400 and hire a reputable home inspector. Then you'll have a third-party leg to stand on regarding the roof, which can become a condition (as in, the seller has to fix it!) of any contract. The new roof may well increase the appraised value. Necessary repairs shouldn't affect any seller consessions.

Message 2 of 7
Anonymous
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Re: Assistance with housing question...

Being realistic:

 

A house that is already listed 10K over purchase price and is FSBO (one of the main reasons to FSBO is to cut out realtors fees so you can lower price/quick sell while still clearing more $) is VERY unlikely to agree to:

 

10K house price drop

Roof repairs

6% concessions.

 

This deal is probably a no go.  It can't hurt to put in an offer, but the seller is going to have to agree to fix the roof at their costs as well as do the concessions and the price drop.  6% is the max I think a seller can contribute so the roo frepair can not be counted into the deal and them pay closing costs.  IT would also have to be done prior to the FHA appraisal more than likely as that is the type of thing FHA will allow. 

 

So, to get a deal like you are looking at (assuming your realtor is correct in his/her price estimate) the seller would have to effectively:

 

Drop the price 10K to get under appraisal

 

Pay for roof repairs that will likely costs quite a bit. say 5K (it could be 2-3X that easy depending upon the roof but we will assume a quick and easy roof job. 

 

Eat an additional 8K in closing costs.

 

Not to say it is impossible, but it is highly unlikely.

Message 3 of 7
Anonymous
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Re: Assistance with housing question...

It was my understanding that the seller doesn't really eat the closing costs, it just allows us to finance them. I was told that the seller concessions would just up my actual loan amount by 8k (closing costs). The house would have to appraise at that final loan amount though. 

 

You're right, it seems unrealistic but I think I will put in an offer anyways. It can't hurt :-)

 

Thanks. 

Message 4 of 7
Anonymous
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Re: Assistance with housing question...

Just a note about FSBO-- unless the owner is very knowledgeable about the mortgage process, there might be a problem with concessions.

 

I'm in contract with a FSBO house and there was no way this guy was going to do a seller's concession. The second we mentioned it he froze up. I think that a lot of sellers without representation think it's a "gift" to the purchaser and it's money they lose off the sale, so they're very reluctant to agree to the concession.

Message 5 of 7
Anonymous
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Re: Assistance with housing question...

Who told you that? When a seller pays, they pay. It shouldn't be rolled into the loan.
Message 6 of 7
Anonymous
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Re: Assistance with housing question...

Seller paid closing costs are different than a seller's concession. With a concession, let's say you agree to purchase a house for $100,000 with 6% concessions. This means you write up a contract for $106,000 and obtain financing for the necessary amount. At closing, the seller gives you $6000. The problem with this is the house has to appraise for a higher amount now, which sometimes doesn't happen.
Message 7 of 7
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