September 24, 2014
A reader asks, “In our contract, we agree and stated the sale was as is. The price had been adjusted for this. We listed that the a/c needed repair on the disclosure. I did not want to spend the money to repair it because I live alone and put in window units, plus my buyer said she planned on replacing it anyway.”
“This was noted on our contract. 3 months later the lender says the a/c has to be in working order, even though the window units work fine and the central heat did work. I had it fixed, $825.00 for a circuit board! What a waste of money. I would rather have given it to my buyer to replace the whole thing! Since they knew about this upfront, should they have notified us?”
This reader question isn’t entirely clear, but it does raise important issues an FHA borrower should be aware of. One such issue involves FHA appraisal requirements and what happens when a home doesn’t pass the FHA appraisal without required corrections or repairs.
Central systems in the home are required to be in good working order as a general rule when it comes to FHA appraisals. The FHA appraiser may note the condition of a non-functioning central air conditioning unit and require it to be repaired as a condition of loan approval.
While lender standards may play a role in some types of home loan issues, state and local building code as well as FHA minimum property standards also have a say. The results of the appraisal may not be immediately available–appraisals take time to process and send back to the lender–so when the results do come out, the lender, seller and borrower find out what must be done if any action is required. The timing of that information varies depending on a variety of factors.
Even if the seller and the buyer agree on an issue such as a non-functioning air conditioning system, that system must still meet FHA standards as well as state/local building code. That is the bottom line when it comes to home loan–buyer and seller can agree on an issue but that may not be the final word on the matter.
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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