Posted on: 18th Oct, 2008 04:44 pm
Hello, recently purchased a home from a Sheriff auction at a great price, I purchased the home at $20,000, about $35,000 under market value and area comps. I put down $2,000 the day of the sale, have another $5,000 to use for closing cost and down payment. I have been approved with 2 major lenders till it got to the appraisal process. The home is in decent shape, good roof, hvac, and foundation. It needs replacment windows "$4,000", new flooring "$2,500" and gutters "$750" I figure around $10,000 will get the home in above average shape, the home should appraise for at least $55,000 after the repairs. My credit is okay, low score of 670, high score of 712, average of 690. My income is enough to finance the deal. My issue is, the home will not appraise under fannie mae or freddie mac standards. Any suggestion what can be done? Is there financing out there what would not require such a detailed appraisal? The land alone is worth $16,500 "City tax records" the improvment $42,000 or $48,500 tax valued. If you can make some suggestion please contact me at "karl960@aol.com" - Thank you!
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This is definately more of a lender question than an appraiser question. Once upon a time I did appraisals for a lender that would make these types of loans based on future value and hold back a certain amount in escrow until the repairs were completed. Of course, with so many lenders closing their doors and others becoming more conservative, most of these programs have pretty much gone away. I know that FHA still does the 203k program if you qualify for that. There are also plenty of hard money lenders out there who might be willing to do that, but their interest is much higher. Perhaps some of the mortgage professionals here might be able to chime in and offer better solutions.
based on the repairs you've stated, it seems that fannie and freddie would accept the appraisal, as long as the house is in "fair" or "average" condition and there are no glaring problems. older flooring and windows are cosmetic repairs. it's when you have missing windows, holes in the floors, or any other glaring problem the appraiser feels compelled to note, that a conventional lender will turn down the loan, or require the problem to be fixed before settlement (an option you don't have with a sheriff sale). if you've already had two lenders look at the property, and you're positive you can't go freddie/fannie, i would look into hard money options. hard money will give you a short-term solution to purchase the house until the repairs are complete. you may even be able to finance some or all of the renovation costs into your hard money loan - then refinance the house to fannie/freddie rates after you've got a finished product.
