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Tuesday, September 6, 2011

Lenders are Looking More at the Condition of the Property

Lenders are just making sure that aren't lending to home that has major issues.
I am not talking about the value of the property -- those kinds of appraisal issues have been with us for some time now. Today, I am referring to the physical condition of the property.
FHA and VA have historically been more stringent than conventional lenders with respect to issues such as peeling paint, unpermitted additions, and non-fully functioning appliances. Nowadays, though, it seems just as likely that a real or perceived deficiency in the property’s physical condition may cause as much of a problem for a conventional loan as for one that is FHA or VA.
Wow, look at the issues this can create, especially in California.
In California it has become common for a buyer to ask a seller to provide a four-page form known as the Seller Property Questionnaire (SPQ). The SPQ was created by the California Association of Realtors® (CAR). It is considerably more detailed and informative than the state-mandated Real Estate Transfer Disclosure Statement (TDS). Although not required by law, provision of an SPQ is often called for as part of the purchase agreement between buyer and seller. What is happening now is that, sometimes, underwriters are asking for a copy of the SPQ.
Why might this be a problem? Suppose the disclosure revealed a roof leak in one corner of the three-car garage. It would cost $1,500 to fix. The buyer appreciates the disclosure, but he doesn’t care because he is going to remodel the garage and put a loft room –with a new roof – over that corner. The underwriter says, “No, it must be fixed before we will approve the loan.”
It's will only put more pressure on the  home prices.  If the seller is upside on equity and is doing a shortsale they won't be spending money to improve the property.  It will probably result in: a) drop in prices b) more negative equity sellers just walking away.

Read it all

1 comment:

  1. Nice. I like the way you collected all the information about real estates. Very informative!

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