Repair rules complicate financing for 'as is' deals

REThink Real Estate

Q: I am trying to buy a home with a 5 percent downpayment, and I’ve been told that the only loan I can use is an FHA loan. I made an offer on a house I really like, but it’s a very old house. My offer was to take it "as is"; I thought I would just get a pest inspection and a home inspection to make sure I knew what I was taking on, but the seller was clear up front that he wouldn’t be doing any work to the place, so I got the place at a very good discount.

Anyhow, somehow the appraiser saw the pest inspection report and now the bank is saying it won’t do my loan unless all the repairs the inspector recommended are done before closing! There’s no way the seller or I can afford it, and the seller had other offers from two other buyers who say they’ll take it "as is." Do you know of any solutions to this problem?

A: It’s one of the strangest but very common things, this real estate version of the "Don’t ask, don’t tell" policy. If the loan underwriter doesn’t know and isn’t specifically told that the buyer has obtained a pest inspection, it doesn’t require seeing it — it’s simply not a requirement for a loan, even an FHA loan.