Please offer input on a unique lending situation

[Marc Knapp]

Dear BP Community:

We are buyers on a property where the appraiser unexpectedly appraised the property to be in Below Average Condition. Our lender informed us that in order to qualify for a conventional loan, the property needs to undergo all repairs outlined in our purchase agreement in order for be appraised as 'Average' ( appraiser stipulated that the repairs requested in our contract would satisfy the necessary items to bring the property up to Average Condition). Our lender also informed us that the biggest issue that raised the red flag and qualified the property to be in Below Average Condition is the detached garage which needs major repair.

Our dilemma:

Our lender gave us the option to buy the property all cash and refinance instead of it being considered a purchase. This option would raise our loan points by .625 extra points (not a major hike) and we would incur roughly $1,000 of extra expenses at closing. After we buy all cash and make the repairs, appraiser would re-appraise the home and we would get 75% loan to value (cash purchase price) on the property. 

1. What do people think about this option?

2. As of right now, we are not in favor of the delayed financing option. What other options exist? 

3. What have other fellow BP community members in similar scenarios elected as next steps?

Thanks all very much in advance!

Ana-Maria & Marc