OK, so let’s say you are a first-time home buyer and home prices have finally reached a place where you can afford to buy. You’ve got some money for a down payment, and you’ve been pre-qualified for a home loan. Maybe you’ve even made offers on short sales that seem to go nowhere, and you’re getting frustrated waiting for something to happen. You’ve found a foreclosure that you like. Sure it needs a little work, but it’s in your price range and you’re not afraid of a little sweat equity. After all you’re pretty handy with a hammer and a paint brush.
Here’s the challenge: bank owned properties typically need repair, but the seller (bank) wants an a-is offer and will neither make the repairs or pay for them. Meanwhile, your lender (also a bank, maybe also the seller) will likely require repairs before they will make the loan. Seems kind of self-defeating, and it is by conventional methods.
You can’t afford the repairs because you’re using all your savings for the down payment. So what do you do?
Build the repairs into your offer. Ask your lender or Realtor for a list of typical items that the lender will require, then go and perform a thorough visual inspection of the property. Estimate the amount you’ll need and add it into your offer price, then ask the seller to credit you for repairs. You have to keep it reasonable, though, say within 3-5% of the offered price. Most bank sellers will entertain this kind of offer, and it can even work for FHA and VA loans.
The point is to ask for these concessions up front. Once you have presented your offer, it will be nearly impossible to ask for additional concessions. The easier you make it for the seller, the more likely they are to agree.