January 31, 2015
A reader asks, “Is the seller responsible to pay for all repairs before closing?”
Assuming that this reader question is in reference to required corrections or alterations to a home listed by the FHA appraiser, much depends on the type of repairs or corrections required. If repairs or corrections are required to fix hazardous conditions, those fixes must happen and a compliance inspection (where required) must occur before the loan can be approved.
Let’s see what HUD 4155.1 Chapter Four says about the appraisal process and required corrections:
“In the performance of an FHA appraisal, the appraiser must
• denote any deficiency in the appropriate section(s) of the appraisal report (site issues in the site section, improvement issues in the improvements
section, and so on), and
• note those repairs necessary to make the property comply with FHA’s MPR, or MPS, together with the estimated cost to cure. The lender determines which repairs for existing properties must be made for the property to be eligible for FHA-insured financing”.
Additionally, “A property with defective conditions is unacceptable for FHA insurance until the conditions have been remedied and the probability of further damage has been eliminated. Defective conditions include
• defective construction, and
• other readily observable conditions that impair the safety, security, or structural soundness of the dwelling”.
And finally, FHA loan rules in this area on Chapter Four state:
“Repair requirements outstanding on the appraisal report must be satisfied before the mortgage is submitted for endorsement. Satisfaction of repair requirements can be submitted by providing
• a Compliance Inspection Report (HUD-92051), as described in HUD 4155.2 4.6.b
• Part B of Fannie Mae Form 1004D/Freddie Mac Form 442, Appraisal Update and/or Completion Report
• the Mortgagee’s Assurance of Completion (HUD-92300) of escrowed repairs, as described in HUD 4155.2 4.6.c, or
• a certification from a “qualified” professional on their company form or letterhead.”
It may be necessary to discuss these issues with the lender depending on the nature of the repairs or corrections.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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