Lender requires carpeting to close?

gzeiger · Joined: 18 Mar 2009 Posts: 1

I'm looking at a traditional 20% down mortgage on a primary residence. The property I want to buy is a foreclosure. It appears to have been an investment property, and the owner ran out of money in the middle of some improvement work or something.

Basically it's in great condition, but they were in the middle of redoing the floors, so there is no carpet anywhere. Also, the whole interior has been recently painted (probably within the last couple months) while it was unoccupied. There is still masking tape over all the electrical outlets from the painting, and the toilets and stove are disconnected and moved out from the wall a couple feet to allow the painters access.

I still have a lease on an apartment through the end of June, so I have plenty of time and money to get these issues taken care of before I need to move in. However, the mortgage broker who gave me by far the best preapproval quote now says the condition of the flooring and toilets may prevent me from closing on a loan without having those things taken care of first. That requirement makes things fairly awkward for me, since I would have to get all the work done on a property I don't even own, and in a much shorter time than I had planned to have for it.

Does that sound reasonable? Why would they care about the carpets if I have a good down payment and the house appraises ok? I've never bought a house before, so I'm just wondering if I'm going to find this requirement everywhere or if it might be worth going back to another broker who gave me a worse initial quote.

DanAronG · Joined: 17 Oct 2008 Posts: 103

Sounds odd to me. Is this the broker telling you that you need to do this or has he spoken to the lender who has said this is a requirement?

It is quite common for a lender to allow you to complete on a purchase but to have a retention on part of the funds if work is requred, and for those funds to be released upon completion of said work.

But it is ridiculous to expect you to do work on a property you don't own.

Have you expressed your bemusement to the broker? What were his comments?

AnnAnderson1015 · Joined: 30 Mar 2009 Posts: 46

Don't be surprise, they can require anything to be done. Well, I wouldn't say anything, but I've had them ask for the front door to be repainted and such.

The problem you have on your hands is now to get the owner, bank, to fork out the cash to do this. Which they won't.

I would recommend to your LO to switch lenders because some lenders don't want to fund your loan and their looking for a way out, without coming out and saying we don't want to deal with this foreclosed property in this area. I've known underwriters who tell me that they blacklist certain area or type of homes. I think this might be one of those case. SWitch lender

Allen_B · Joined: 01 Apr 2009 Posts: 16 Location: California

I agree it sounds very odd of them to request you to do work to something you don't own, I would run, don't walk to another broker on this one, something doesn't sound right.