All Forum Posts by: Johnny Debt

Marcus,

Your post is very informative and answered a lot of the unknowns in a conventional rehab. I guess this is different on a bank to bank basis.

When you say that all systems must be working, do you mean the heating/water/gas systems?

Thank you

Curt,

My goal is to do as much repairs myself as possible so that I can save on the labor. I am handy enough to even level floors, fix pipes and have boiler experience.

When I submitted my offer I was required to use a 203k or Conventional Renovation loan. If the house appraises as in condition could it be possible to forego all the repairs from the bank? I want to avoid the financing of the repairs as I have cash on hand to do the repairs myself.

This is very confusing, if anyone can help, please let me know.

Curt,

Who decided what repairs were necessary? The appraiser or you?

Hello everyone,

I am currently purchasing a reo with financing from a 203k or conventional renovation loan. I am a very handy man myself and am able to make a lot of repairs on a house, however I am not a licensed contractor.

I understand the process as such. Once in contract with this type of loan I will have to bring a contractor in to get a job and cost write up. An appraiser from the bank will come to appraise the house in it's current condition. The appraiser will also take the work and cost write up from a licensed contractor and will appraise once again after the work ia done.

I believe I can save a lot of money if I do the repairs myself, however this is not possible with these type of loans. My question is, who dictates what is required to be fixed in q home for these loans. I would rather minimize the fix up cost and do the repairs myself afterwards. Is there a way for me to tell the contractor I only want to fix the house to pass appraisal?

Any help would be greatly appreciated.

Doug,

No I don't think so, because there is no lender bank involved.

Won't the bank first issue a conditional commitment, on conditions of the appraisal? The contract only says commitment doesn't specify. Can I ask the bank not to do a commitment until appraisal and everything is complete?

Jon,

Thank you for your help, but I have spoken to my bank which is Wells Fargo, and they say the Commitment and the Appraisal go hand in hand. This is what scares me. I don't know if this violates anything, or if we should go with another bank.

I believe Wells will issue an commitment letter conditional for appraisal. However the contract states "commitment" only, not a conditional or anything else. So the language is very general. My attorney believes a conditional commitment will kill the financing contingency.

This is the scary part. I didn't know lawyers were here to scare the sh*t out of us lol. He did a good job.

Steve is right. I have the contract but did not sign it yet. He is also right that my attorney almost made me piss my pants. But I have decided to go ahead with the contract. There aren't any other way around financing a REO.

The only problem is the financing contingency. If appraisal comes in bad and the bank refuses to lend then the REO bank can retain my earnest money. This is a risk that I believe everyone has to take when dealing with Financing REO purchases. My lawyer tried to change the language but the REO bank will move to next buyer if that happens.

I have cash to make up for appraisal, but how low can the appraisal come? I have no idea. Hopefully the people on this website are correct and the REO bank will negociate if appraisal comes in low and that the REO bank isn't out to get my Earnest Money.

Any opinions on the financing contingency Steve?

Well guys, I didn't update, but my offer got accepted the 1st day after it was submitted. I now have a contract that is being combed through by my attorney. Let me tell you guys, these REO contracts are very frightening. Be sure and ready to close ASAP once you get the REO bank to sign and agree to sell also.

The main risk I see in this type of REO purchase with financing is that, once you get the commitment letter you will waive the financing contingency. You better hope the appraisal comes in. The best thing to do is rush your appraisal from bank before commitment letter is given out. Once the commitment letter is handed out, the clock is ticking to close. The REO I have is from indy mac but the majority of the bank contracts I've seen are like this. And if you try to change the contract the REO bank will go to next buyer.

I am going to live in this home.

REIWizard,

When we first visited the property I went with contractor who gave me a reasonable estimate of what it cost. It was a true inspection from someone certified. I can back out of the deal now since no formal contract has been signed. The earnest money has to be 10% per the contract. They will not budge on this amount. I've got a pre approval from a lender already.

The formal contract states that once a commitment letter has been obtained the financing contingency disappears. And the loan can not be changed from what the commitment letter says.

Right now I am uncomfortable with this deal because there is so much risk involved.