Buyers Lender Wants All Rehab Documentation

[Stan Butler]

We flip a fair amount of properties every year and from time to time we complete the buy-rehab-sell transaction within 90 days. When that occurs, the lenders appraiser will usually ask for a list of repairs to justify the price increase. We have even had to get a second appraisal when the buyer was doing FHA financing. In our latest deal, we have run into a lender asking for the following documents:

• List of all contractors and licenses
• Copies of all permits for work
• Every receipt of items purchased for the home (about 35)
• Make and model number of new appliances, hvacs, garage doors

Needless to say I think this deal is going to die unless the buyer finds another lender to work with. Does anyone else get this kind of request??

[Stan Butler]

Its not a question of having all the records, its a question of divulging what things cost and who my contractors are. The lender is loaning money against a property based on what the property is worth today. What was paid for the property in the past, or for the rehab, should be of no concern. The property is worth what its worth, whether I did all the work myself, or paid $40k for renovations. Otherwise, whats the point in comps?? You might as well just say its worth whatever you paid for it...

Would you go to the builder and ask for receipts for a new home purchase?? I dont think so...

I can see the lender wanting this stuff if I was refinancing a prior purchase and looking to use current value.