Ro Troia

Don’t Let the Cat out of the bag

When purchasing a home it is very important to have the home inspected for possible issues that might come up in the future. Many people do not realize the importance of a home inspection until it is too late.  But there are other reasons to have a home inspection done especially when you are dealing with REO or Foreclosure properties or properties that are being sold “as is”.   A home inspection can be used as another negotiating tool for buyers.  Lets say the home needs plumbing repairs but you are a licensed plumber and can do the repair work on your own.  You can negotiate with the seller or Bank a lower price in lieu of repair work being done to the property.  This is a great way to save additional money on your overall purchase price when there is simple work that can be done after the property has already closed. 

 I have had REO/ Bank owned properties reduce the price over 10,000 to compensate for repair items.  Most sellers including banks and lender owned properties would much rather take a reduction in price than have to pay to have work done on a home.  The most important thing to remember if you are negotiating a new price per inspection items is NOT GIVE THE INSPECTION REPORT TO YOUR LENDER.  Buyers never give an inspection report to your lender or your underwriter.  This can cause all kinds of problems with obtaining your financing.  Especially when you are dealing with Bank owned or Lender owned properties.  Also when dealing with HUD properties that are sold “as is” make sure if you have a home inspection done it is not given to your lender.  The lender can require that repairs be made prior to your closing on the property.  This is fine if the seller agrees to the repairs but if the seller does not agree or if the seller is HUD, repairs cannot be made to a property prior to closing. 

Giving an inspection report to a lender can cost you the deal so don’t let the cat out of the bag if there are inspection issues and you still want to purchase the home make sure that you are the only one who knows about it.  Also if you are obtaining financing through an FHA loan make sure that you are not going to have inspection issues come up.  If you are unsure about the property condition I would recommend trying to obtain a conventional loan instead of FHA.  FHA loans have specific guidelines and if the property condition does not fall within these specific guidelines your lender may not be able to finance the loan.  All of these guidelines are regulated through Fanny Mae and Freddie Mac so they are universal lending guidelines. 

Be a smart buyer do not let the cat out of the bag.  If you find inspection issues and still want to purchase the property do not share that report with anyone ask for a price reduction or terminate your contract do NOT GIVE IT TO YOU LENDER because it can cost you the loan and make sure to not use FHA financing unless you know for sure that you will not have any inspection issues on the property.

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This entry was posted on Thursday, August 21st, 2008 at 4:19 pm and is filed under Buyer's Corner, First Time Buyers, Home Inspections and Maintenance, Market Conditions, REO and HUD Talk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

1. Kitchener mortgage said at February 21st, 2010 at 8:51 am

   Just a quick comment to thank you for your interesting post. Do u know where I could find more on the subject? well done. Rachel x

2. gold coast accommodation apartments said at June 16th, 2010 at 9:36 pm

   I’m with you every step of the way. You have a legal entitlement to your own ideas, and you ought never let anyone tell you otherwise. Keep it up!

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