FHA Loans

Thank you for the infomercial. Now, for a bit of realism. As a real estate investor, I run screaming anytime comes to me trying to buy with a FHA loan. The process is often long and convoluted, with paperwork mess-ups and blown closings the norm. The FHA mandates special home inspections that are different from prevailing codes, and one you let them in, you often have no legal way to terminate a sale. That can leave you on the hook to pay many thousands in upgrades to meet the FHA guidelines which, in practice, simply are not needed. If someone comes to me with FHA, I simply tell them that I already have a full price offer. That way, they either go away, or they offer to pay over asking price, which is often enough to take the risk of the unneeded upgrades.

-john-

Thank you, that sounds like valuable advice. (No, this is not sarcasm, in case anyone was wondering).

-Mark Bole

Interesting. You can't just refuse to make the upgrades? We recently sold a property, and we negotiated with at least one FHA buyer, but we did not get to the inspection. How can they lock you into making the upgrades (as opposed to refusing and letting the buyer back out of the deal)?

-Will

You can refuse to make the upgrades (which is an entirely viable avenue), but the financing will be denied by FHA. Most (and all of my personal) sales contracts are contingent on financing approval deemed acceptable to the buyer. No financing, no contract.

Nothing is more annoying than thinking you have a sale, taking the property off the market (or indicating "under contract"), and signing a sales contract only to have the contract voided because the financing contingency could not be met.