Help! FHA Appraisal is "subject to"

[WINNING]

Hello everyone!

I am scheduled to close next Friday and the appraisal came on Thursday.  There was one faceplate missing on an outlet in the garage and an exposed wire on the exterior of the home that needs to be in conduit.  They stated the cost to cure was $150.  There were two boxes checked on the reconciliation: 1. subject to the following repairs or alterations and 2. subject to the following required inspection.  This is a Fannie Mae Homepath home and I've heard that Fannie Mae will not do ANY repairs!  Is this something I can get an FHA Escrow for?  If Fannie Mae agrees to make the repairs will it have to then be reinspected before closing?  I am waiting to hear back from my broker but I also like to get other insightful opinions as well. 

Thanks a million!

[StartingOver10]

In the fannie mae REO's I have sold they haven't been receptive to repair escrows at all. However, I have to admit that when it is a very small issue like you describe we are more apt to take care of it and have the appraiser come re-inspect right away to close on time.

I have had Fannie Mae replace a roof before but we knew that going into the deal and wrote it in the offer. That is an entirely different issue.

Discuss with your agent, but if it were me I would be inclined to first see if the seller's agent will get it taken care of and if they don't, then take care of it prior to closing. I am only suggesting this because it is a small issue ($150). But that $150 stands between you and the closing. Have you had an electrician look at it? It might run you much less than even the $150.

[WINNING]

Thanks for the quick response StartingOver10!  

My broker is mirroring your comments.  He has told me to find an electrician.  My agent is saying she has to wait to see what the lender says before proceeding into talks with the listing agent. Shouldn't they be proactive by working together to help get this deal closed if we are already aware that this will be an issue?  My file is going into underwriting today and my broker says he should hear something back by Monday.  What concerns me is the electrical inspection that was requested in the appraisal.  Can this be any licensed electrician?  Am I the one responsible for getting this done to help keep the closing on track or wait for Fannie Mae?

This is the second time this home has been on the market.  The first one fell through due to buyer financing so essentially this home has been on the market since February.   Would that encourage Fannie Mae to expedite this and get this transaction to closing?

[StartingOver10]

In my experience Fannie Mae doesn't care if it closes or not. Here in my market the prices are increasing so they get a higher contract price each time. Besides if you don't close on time there is a penalty of $X per day ($100/day is common).

I would jump on it. The asset managers are notorius for dragging their heals to answer any questions relating to repairs. They don't encourage open communication at all.

Normally you can use any licensed electrician to do the repair.

[WINNING]

Now my agent is saying that Fannie Mae will not allow ANY repairs to the home before closing and that it may kill the deal.  I am confused.  She is now asking if my lender is able to do a 203(k) or escrow holdback otherwise it may kill the deal!  Does this sound accurate or should she be looking at more possibilities.  It's like she isn't even trying to reach out and give it a try :-(

[StartingOver10]

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@WINNING wrote:

Now my agent is saying that Fannie Mae will not allow ANY repairs to the home before closing and that it may kill the deal.  I am confused.  She is now asking if my lender is able to do a 203(k) or escrow holdback otherwise it may kill the deal!  Does this sound accurate or should she be looking at more possibilities.  It's like she isn't even trying to reach out and give it a try :-(

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No. She is not understanding that there is no way that Fannie will authorize you to do the repair - its a liability issue for them.

There is no way you are going to be able to convert this to a 203k loan and get funded in a week...not going to happen.

What usually happens is the work "somehow gets done" on these small issues prior to closing. Usually done by sellers before it goes on the market but if something is missed (like this $150 issue) then it is done by the buyers and the appraiser comes in to verify it is actually completed. Then you close. Appraiser needs time to do it too. You are running close on time.

The only other thing you can do is go to your lender and see if they will waive the requirement - probably difficult because it is considered a safety issue.

[StartingOver10]

Doesn't sound like she has done many Fannie Mae REO's.  Most close cash for this very reason. She needs to understand the whole issue.

[WINNING]

Soooo.... if somehow an electrician magically appeared at the home over the weekend and made the repairs and my broker arranged for the re-inspection then we could be good to go.  No harm no foul?

[StartingOver10]

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@WINNING wrote:

Soooo.... if somehow an electrician magically appeared at the home over the weekend and made the repairs and my broker arranged for the re-inspection then we could be good to go.  No harm no foul?

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Exactly.

[WINNING]

I hope you didn't hurt yourself when you fell from heaven:-) Thanks so much!  I now have a solid course of action.  My broker and I are NOT going to let this deal die!  I will just leave my agent out of the loop until we have a clear to close.