FHA says flip -- I mean fix -- that house
By Matt Carter, Friday, June 13, 2008.Bookmarking Sites
To help lenders get REO properties off their books, FHA is lifting a 90-day waiting period on resales instituted five years ago to deter fraudulent/predatory home flipping (see Inman News story). But lenders are probably still going to have to do some rehab on many of the properties they foreclose on before turning them around to an FHA borrower. FHA has eased up a bit on requirements for minor repairs, but before you can sell a home to a borrower relying on an FHA loan guarantee program, it's got to be "safe, secure and sound."
Here are links to FHA appraisal and property requirements, including repair conditions. Guidance FHA issued lenders in a December, 2005, letter is excerpted below:
Examples of minor property conditions that no longer require automatic repair for existing properties include, but are not limited to:
· Missing handrails
· Cracked or damaged exit doors that are otherwise operable
· Cracked window glass
· Defective paint surfaces in homes constructed post 1978
· Minor plumbing leaks (such as leaky faucets)
· Defective floor finish or covering (worn through the finish, badly soiled carpeting)
· Evidence of previous (non-active) Wood Destroying Insect/Organism damage where there is no evidence of unrepaired structural damage
· Rotten or worn out counter tops
· Damaged plaster, sheetrock or other wall and ceiling materials in homes constructed post- 1978
· Poor workmanship
· Trip hazards (cracked or partially heaving sidewalks, poorly installed carpeting)
· Crawl space with debris and trash
· Lack of an all weather driveway surface
Examples of property conditions that may represent a risk to the health and safety of the occupants or the soundness of the property for which FHA will continue to require automatic repair for existing properties include, but are not limited to:
· Inadequate access/egress from bedrooms to exterior of home
· Leaking or worn out roofs (if 3 or more layers of shingles on leaking or worn out roof, all existing shingles must be removed before re-roofing)
· Evidence of structural problems (such as foundation damage caused by excessive settlement)
· Defective paint surfaces in homes constructed pre-1978
· Defective exterior paint surfaces in home constructed post-1978 where the finish is otherwise unprotected.
Lenders must review the appraisal to determine whether the appraiser has reported any property conditions that will affect the health and safety of the occupants or the security and the soundness of the property and must require immediate repair where the property condition poses a threat to these criteria.
All rights reserved. This content may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this content without permission is a violation of federal copyright law.
You must login or register to post a comment.
Submitted by Rick Belben on June 14, 2008 - 8:36am.
It may not help on a lot of properties but it surely can not hurt. At least they are making an effort to help out the cause.
Rick Belben
Amerivest Realty of Central Florida
Orlando Real Estate
Orlando MLS
Submitted by Ki Gray on June 14, 2008 - 5:14pm.
The problem we are seeing with REO properties is that lenders are flatly not returning calls. We waited three weeks to get "assigned" someone that would handle an REO property we were the listing agent for. Changing regulations might help but until these companies can start handling REO property sales more quickly I think they are going to be in for some serious problems.
Site Austin Texas real estate.
Search Austin MLS
Blog Austin Real Estate Blog
Submitted by Michael Taylor on June 16, 2008 - 4:58am.
Ki, I have seen banks being more and more responsive but it still varies greatly with response times. Some banks are way better than others and some still seem grossly understaffed.
I think measure by HUD will help out, maybe not to a great extent, but every little bit counts.
Mike Taylor
Indianapolis real estate | Fishers Indiana Homes | Indianapolis Real Estate Blog
Submitted by Christine Donovan - Costa Mesa Real Estate on June 16, 2008 - 10:18pm.
This is great updated information. Glad that they're trying to make it a bit easier.
website: Costa Mesa Real Estate.
blog: Costa Mesa Real Estate Blog
Submitted by Teresa Boardman on June 17, 2008 - 3:01am.
I am positive I have seen this house. No evidence here that FHA has eased up on anything. Even if they did our fair city has so many strange rules that buying and fixing homes up doesn't seem like a viable option. I think they plan on just letting them sit forever.
Submitted by Wendy Polisi on June 18, 2008 - 11:25am.
This is great information and hopefully it will help things! I agree with others that the banks in general are unresponsive and appear quite content to hold on to homes forever. Of course, it doesn't help that the people we are trying to contact are over-worked and likely under-paid.
Submitted by Glenn Ginsburg on October 17, 2008 - 5:57am.
Glad to hear that FHA is easing up on some of their appraisal contingencies, but still be concerned about the health and safety of the buyer.
Moving these REO's should help with reducing the existing inventory of available homes in areas where there is excessive inventories.
Glenn Ginsburg
A Delta Realty
Bonita Springs
Worthington Country Club
Submitted by Larry Hotz on October 24, 2008 - 6:56am.
Generally, FHA loans here are easier to get than conventional loans. At least there's no worry the lender is can require a second FHA appraisal. That happens all the time with conventional loans.
Also, conventional lenders are still very concerned about defects and fix up properties. We have had loans which were approved and scheduled to close when just prior to closing the underwriter required a second appraisal. Once the property is appraised FHA, it stays appraised.
Denver Real Estate | Denver Search | Denver Real Estate Blog
Submitted by Spencer Mason on November 19, 2008 - 8:50am.
If waiving the FHA 90-day waiting period does manage to get more buyers into REO homes quicker, it would help the housing market more than by simply reducing the supply of unsold properties. It could also benefit entire neighborhoods. Because when there are a lot of vacant or foreclosed homes in one area it discourages buyers from purchasing there. That lack of new buyers and fresh investment makes it harder for communities to bounce back after tough times. This initiative could help to combat that trend, or at least work in the direction we need to go for regaining a healthy housing market.
Chicago Condos | Chicago Real Estate