Loan Modification

When your FHA lender requires repairs

By Gina Pogol

Some of the best deals out there (foreclosure homes, short sales, REO) may require a little work. Especially if you intend to finance your bargain purchase with an FHA mortgage. FHA required repairs are those repairs necessary to keep the home from falling apart and to protect the occupants from health and safety hazards.

Ideally, this issue should come up before you pay for an FHA-approved appraisal and get your bad news. How do you know if a property needs repairs before it can be financed?

1. Owner disclosure. In many states, the owner is required to disclose all known defects when selling a property.

2. Ask your real estate agent. Hopefully you have your own buyer’s agent who is not representing the seller, and hopefully your agent is knowledgeable about FHA property.

3. You can check this list of the most common FHA-required repairs provided by California Certified Residential Real Estate Appraiser Evan Gillens.

4. If you see a listed flaw like bare concrete floors in the living area, you know that there will be required repairs. This can be included in your negotiations; for example, requiring the seller to take care of repairs up to a certain dollar limit before closing, or making the sale contingent on you being able to get approved for an FHA 203(k) or streamline k loan to purchase and rehabilitate the property.

Here’s that list:

UTILITIES (all systems must be turned on,  tested and functioning)
? Electricity
? Water
? Gas (propane included)
WATER HEATER
? Turned on and functioning
? Adequate gas exhaust ventilation
? Seismic (earthquake) straps properly installed
? PRV (pressure relief valve) installed
? 3/4? copper PRV overflow pipe properly installed
HEATING & COOLING UNITS
? Must be in place AND in working order
KITCHEN APPLIANCES (functional)-
? Range/oven is required (only IF a built-in unit)
? (Free standing/Slide-in units NOT Required)
? Dishwasher is required (only IF a built-in unit)
PAINT
? Correct chipping or peeling paint (pre-1978)
? No Bare Wood (must be sealed- paint or sealant)
ELECTRICAL WIRING (adequate & not exposed)
? Adequate GFI plugs (1 per circuit near water)
? Main electrical panel (exterior & interior covers)
? Plug/switch covers must be installed
? Fixture sockets must be covered
? No exposed wiring (or romex) below 8 feet in garage
PLUMBING
? Adequate hot water
? Adequate water flow in all faucets and toilets
FIREWALL (no breaches)
? Fire door with an automatic closing mechanism
(Must close & latch automatically)
? No holes in wall, fire door, or finished garage ceiling
(Including animal doors or missing handles)

WINDOWS
? Replace broken window panes (cracked OK)
? Windows must open adequately
? Security Bars-
(Must have one quick release per room)
POOL/SPA
? Must be filled with clean water
? Filter must be functional
MISCELLANEOUS ITEMS (requiring repair or action)
? Floor coverings (no bare concrete)
? Roof covering (roof certification needed if
excessively worn OR missing shingles)
? Signs of water leaks on ceiling
? Trash & debris must be removed
? Exposed metal support brackets in patio
? Standing water- not OK
? Very green (lush) area in yard (possible septic leak?)
? Inadequate smoke alarms
? Garage door opener (IF there is one, it must be
working, and properly adjusted)

Full post as published by FHA Mortgage Guide on October 05, 2010 (boomark / email).