Buying A Diamond In The Rough
Buying A Diamond In The Rough
It may be your budget or the thrill of doing it all yourself but you are in the market for a diamond in the rough. But just how rough can a house be before a lender decides not to take the risk on a mortgage?
When you negotiate the contract make sure that you include a provision for a home inspection for structural integrity defects and potential problems. This isn’t part of the appraisal it is a separate detail. A home inspection ascertains the health of the house you are buying. Whether it be a bad roof leaky plumbing or termite damage a professional inspector will find all of the major problems. As part of your report you will receive a list of what needs to be repaired or replaced the time frame and the potential costs. If you are buying a fixerupper you may find that your lender will require an inspection. Some will and some won’t. But you should insist on one to protect your best interests.
What if you luck out and there are no major problems just minor ones? Maybe the carpet is worn and needs replacing. Perhaps the deck needs a little work. New paint and fresh air could be all it needs.
Minor cosmetic concerns are usually not strong enough to scare away lenders but could lead to negotiations between the buyers and sellers. Unless you’ve done this before you may find a good agent is invaluable to negotiate for you.
If you want certain things repaired by the seller such as the mailbox fixed and the deck painted make sure it is in the contract. If it is the seller must perform. You may be able to have the appraisal include the repairs spelled out in the contract. This can help you when getting a mortgage as lenders will only lend on the lesser of the appraisal or purchase price. Just make sure that it is all in the contract.
Occasionally your seller may ask to perform the repairs after closing. Many buyers simply ask for a seller’s concession. Instead of installing a 5000 carpet before closing the seller agrees to reduce the purchase amount by the 5000 it will cost the buyer to put in new carpeting.
But if you don’t have that 5000 in hand to buy the carpet don’t expect your lender to give it to you. Even if your contract states that the seller will give you back 5000 after closing don’t expect it to happen. Cash allowances written into contracts can’t happen. The lender will not allow the seller to hand over cash at closing. Your real estate agent should steer you away from this and help construct a sales contract that will please both the buyer and the seller. But don’t expect to come home with 5000. It just won’t happen.
Buying a fixerupper can be rewarding. You get to choose how you want to improve the home. But it is a lot of work and definately not for every buyer or lender. Your best bet is to be completely upfront with your lender about your intentions. This will help the transaction to go smoothly.
About the writer: SellSarasota.com is a Sarasota Real Estate company with professional effective services to help you succeed in the Sarasota Florida real estate market. Visit SellSarasota.com for information on neighborhoods and home listings and Sarasota Foreclosures.
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