Residential real estate has been rapidly evolving over the past year, due to the ever changing market, recent government regulations, and increasingly complex lender bureaucracy and closing requirements. Here are some of the things we have learned at Kilcommons Law, which may help you to navigate your real estate transaction to a successful conclusion.
FHA Mortgages Can Be Challenging
The Federal Housing Authority (FHA) mortgages have always presented a challenge due to the “appraisal” process, which is not a reference to the market value of the property but rather the conditions of the property. These mortgages are subject to and contingent upon separate inspections by “appraisers” to determine whether the Seller/Homeowner is required to make repairs, including painting, before the loan will be approved for closing. Now, however, at least one major lender is requiring a similar process for conventional loans. Home Sellers should be prepared for two and perhaps three inspections of their home depending upon the lender and municipality: the first inspection by the Buyers’ inspectors (of course the Buyers may waive this step, but not likely); the second inspection by the municipal inspector (provided a Continuing Certificate of Occupancy is required), and now a possible third “appraisal” inspection by the lender. The scope of the lenders’ inspections is still unclear, but they will certainly flag any safety issues.
TIP: Hire a licensed home inspector inspect your home before you put it on the market. By doing so, you will get a grasp of the issues that are likely to be raised by the Buyers, the municipality or the lender. By proactively addressing these issues, you will likely have a smoother transaction. In addition, you may be able to attract an offer quicker, or higher even, if the Buyers see that your home is in good repair.
FHA Loans and Water Well Tests
We recently had a situation where the FHA refused to accept a well water test because it was not “raw.” Specifically, the FHA refused to accept a water sample that was run through a remediation system. Unfortunately, this effects a great number of properties in Hunterdon County which draw from wells and rely on some sort of water remediation system. Further, the FHA refused to accept a raw water sample that contained secondary contaminants (we’re talking PH!). Generally, secondary contaminants are not regarded as a safety concern.
TIP: Seller—be proactive and have a raw well water sample analyzed before you market your home. If the raw sample analysis proves that remediation is necessary, then be certain your realtor is aware that any prospective Buyers requiring an FHA mortgage will not be qualified to bid on your property. Better to find this out at the outset, and before both parties spend a significant amount of time and money once the contract is firm.
Underground Storage Tanks (UST)
I recently participated in an internet POD cast (Hunterdon Chamber of Commerce) with home inspector, Steve Bayly, of Brass Tack Home Inspections, and Patrick Gregory of Taskman Home Improvements. We had a good discussion about the issue of underground storage tanks (UST). Most people think of oil when they see this acronym, but in our collective opinion, they should seriously consider underground propane tanks, as well. These tanks have been used for home heating, cooking and clothes drying for a generation. They deteriorate, so these tanks do pose a risk. Therefore, have them inspected and ask whether they are owned or leased by the Seller.
TIP: Inquire of the Seller if there is an underground storage tank on the property -- whether or not it is in use. Obtain the signed Seller’s Disclosure from the realtors, which should disclose any USTs. Have your attorney include this item in her/his review letter. Be prepared to spend money to have any UST inspected. Find out if the propane UST is owned by the gas provider or the homeowner (if leased, obtain a copy of the contract).
Best wishes for a stress-free and successful real estate transaction!
BE ADVISED that these comments are not intended as legal opinions and are not to be relied upon as legal advice. If you need legal advice, please contact us to discuss the specifics of your real estate transaction.
© KilcommonsLaw, P.C. 2016