Friday, April 25, 2008

FH-pain-in-the-A loans

So of course, I thought I was safe posting SOLD, waiting until after the home inspection.

Then came the FHA appraisal/inspection Tuesday.

I know FHA loans have extra requirements so I made a point of checking things that had been an issue when I bought my house with an FHA loan: outlets and I bought a railing to install for the staircase.

Turns out they've lightened some of those rules in the last year, particularly the railing rule. (not needed if the staircase has walls on both sides)

But they haven't modified any of the rules for the exterior:

No peeling or chipped paint.

None.

Um, well, ...

It was obvious to anyone who looked at the house that it would need a paint job sometime. I figured I got the interior up to snuff and the new homeowner could tackle the exterior at some point.

So Tuesday night, I learned that the FHA would require the porch ceiling, some wood trim, two doors and most of the lower half of the house to be scraped and painted AND all of the windows needed to be reglazed to approve the loan ...

IN 10 DAYS!

They're picky about this stuff because older homes likely have lead paint, which can be a hazard to children.

I've got an idea: How about the government doesn't back loans for families whose kids are so stupid they eat the dirt in the yard? A "don't lick the exterior" clause?

So the options are this:
  • The work gets done before the sale.
  • Money gets put in escrow (held by a third party) to pay for the work later.

The problem with the escrow money is it is 1 1/2 times the amount estimated to hire someone to do the work.

When I bought my house, there was a $500 minimum for an escrow. My porch needed to have the ceiling scraped and painted so I had to cough up $500 to ensure I would do the $30 project later.

Sigh.

We find out the escrow amount today.

I'm under the impression who set aside that money is negotiable, but my buyer's lender has said it's my problem.

Meanwhile, I've taken the last two days off of work to make as big of dent as I can in the project list to minimize the potential escrow amount.

Ideas for the FHA:
  • Inform buyers of regulations in advance to guide their home purchase
  • Give sellers the list of requirements immediately
  • Schedule inspections earlier to allow time for negotiations or project completion
A few helpful links:
Best list I've found explaining FHA requirements
FHA inspection checklist
Difference between a home inspection and FHA appraisal/inspection

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