REO purchase-uninhabitable?

8 years ago

last modified: 8 years ago

Hi All,

We found a great property with a house that could be amazing with a few minor repairs but I am afraid it could be considered uninhabitable.

There was a car fire in the garage and all the work has been done ( rewiring, etc) except for the drywall.

There are also some boarded up windows and a missing water heater. It does have stove and ovens but no fridge. It also doesn't have power or running water since it is vacant. Everything else is in working conidition.

We we wanted to stay away from the 203k loan program because the work we want to do to it will take longer than the 60 day rent back period and we would like to stay in our current home until the work is closer to complete. Also they require 20 percent down which we have but would need to do a major overhaul of the house.

So we would be using cash for 10 percent down and using a home equity line to do the rest of the repairs until the house is sold.

Does anyone know what would determine if a house is uninhabitable or keep us from getting a standard loan on it?

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Comments (3)

Denita
8 years ago
last modified: 8 years ago
Does the house have the capacity for power? In other words, is the power operational and just off because it is vacant (common with REO properties) or is there a mechanical issue preventing power (panel ripped out for example)? I have sold properties in each of these conditions when they are REO properties. The best loan to get is a rehab loan. I don't understand why someone is telling you that 20% down is required for a rehab loan, unless this bumps up against your max DTI ratios.

Sounds like you may need to speak to another lender or two or three to get other loan programs. Stay away from big box banks, they are the most conservative lenders now. Go to someone that does only mortgages and has a few rehab loans for you to compare features.
User
8 years ago
last modified: 8 years ago
A few minor issues is a gutter with a missing downspout and a leaky faucet in the tub. It's not a gut to the studs complete renovation that would be better as a tear down and new build.

You are either vastly over estimating the amount of work this house needs, or vastly underestimating the expense of such work. Neither scenario is at all good for long distance.

You'd do much better to go back to the new builds. A known quantity is a much safer bet for a move. Unless you want to pay cash, live in an RV for two years, and regret not doing a teardown at the end of the project.
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B Carey
8 years ago
Keep in mind the 203K loan is going to require you to hire that work out. You will need to get quotes ahead of time.

You may find you really have to put 20% down for a conventional loan that will allow you to buy and work at your leisure. You also may be able to pull equity from your home to go towards the new purchase...assuming it doesn't max out your DTI.

If it were me, I would pull the 20% down from my current house, then use cash to make the new home livable. I'm assuming that you are doing a good chunk of the work yourself? If not, you may want to consider not buying an REO.

I see no reason you have to look at new builds. A preexisting home without major repairs is just fine.