USDA inspection on REO property

[rose921]

So I thought I had done all my research and we were ready to start the home buying process.  We found a bank owned house that's in pretty good condition.  It'll need freshened up of course, new carpet in a couple rooms, paint, fixtures and clean up the landscaping. The roof, siding, windows all look good.  There are some of the kitchen cabinets missing but the kitchen sink and surrounding cabinets and countertop are still there. We would get new cabinets of course.  I called a broker today to get the pre-approval process started so we can put in a offer and the LO told me that the property wouldn't pass USDA (or FHA) inspection because it needs some of the kitchen cabinets and new carpet in a couple rooms.  I thought the inspection was for termites, structural issues, water & sewer up to code etc...I had no idea that needing new carpet and some cabinets wouldn't pass inspection?? It just seems a little excessive to be true.  I'm hoping he was just not wanting to hassle with us,wanting to do USDA financing and buy a REO property was maybe a little more work then he was willing to get himself into?? Your thought and knowledge are appretiated!!

[jzsnow]

We are currently waiting on to close on an REO home and going usda. Our home wasn't missing cabinets, but, the carpets are not able to be saved at all! They are beyond destroyed. The inspector nor appraiser raised an eyebrow. They said the main things were HVAC working, gas/heat working, a stove in the kitchen that works, and running water.

[rose921]

Thanks for your reply jzsnow! I'm so stressed and I just got started.  Well there is no stove in the kitchen (no appliances at all actually) but I didn't think that would be a requirement either, houses get sold all the time with out appliances right?  I did call another broker that didn't contradict what the 1st LO said but said he may have some programs available and would call me tomorrow. He wanted to call the listing agent to get more details on the condition of the house.  We only wanted to go USDA so we don't have to put alot down and then we would have more money for the new carpet and cabinets etc with out having to take out extra money for improvements.

[jzsnow]

I do know for a fact usda requires a stove.

[rose921]

Ok. That's a bummer. Idk where to go from here. Does anyone know what options we may have to finance this home? The bank that owns it will not put in a stove or cabinets just to get it to pass an inspection. The LO that told me this info earlier today said we would basically have to go with a conventional loan &'put 20% down with at least a 720 credit score. We just finally got in the mid 600's. will FHA be as strict on the inspection as USDA? But we really didn't want to pay pmi.

[jzsnow]

You might hate this solution, but I'll throw it out there.

You can buy a used, crap stove on Craigslist and put it in. Then have it inspected. You'd be out the money of the crap stove if you don't buy the house, but that would pass inspection.

[natesezgoblue]

we're just finalizing our USDA.  I believe that the home has to be liveable the way it is, when you take possesion.  Liveable for 1 year.

[rose921]

Thanks for the advise from both of you. I did hear back from the 2nd LO I talked to yesterday. He talked to the listing agent of the house to get specifics on the condition of the home. He left me a message & said the house should be fine to go with usda. We'll just have to escrow the cost of the repairs to fix after closing. He was gone for the day by the time I was able to call him back to get more specifics so hope to start the pre approval process tomorrow. He emphasized "after closing" when he mentioned the escrowing of repairs so that's good. Just curious if that means we may be able to finance the repairs or we will have to put the money in a escrow account out of our pockets? In wasn't aware of any program that usda offered to fund required repairs. Anyone know of any? Thoughts? Either way, I'll talk to him tomorrow & get more info.