Article - Ineligible for Loan
Colonial Beach Realtor
a division of Treck Realty
When it comes to selling your home, one crucial decision homeowners face is whether to sell the property "as is" or to make repairs first. This decision can significantly impact your ability to sell to the vast majority of buyers who rely on financing options such as FHA, VA, or USDA loans. Considering that almost 99% of home purchases are financed through loans rather than cash transactions, ensuring your home is eligible for these loans is paramount. By limiting your buyer pool to only those who can pay in cash, you might end up accepting a lower offer than your home's potential market value.
Should You Make Repairs?
The decision to fix issues like a damaged roof hinges on a critical question: Is this the only obstacle preventing a loan-based purchase? If it is, then making the repair could be worthwhile. However, if multiple significant issues would still make the home ineligible for financing, then repairing only one aspect, such as the roof, might not be the best investment.
Consider a case from last year involving a property in Ebb Tide. The home needed a new roof, and the backyard pool had been neglected for nine years. Both of these issues rendered the house ineligible for financing. The advice given to the owners was straightforward: If you're not willing to address both problems, it's better to leave them as is. Despite this, the owners replaced the roof, investing $11,000 without addressing the pool issue. This decision did not pay off; the house ultimately sold for the same price it likely would have fetched with the old roof, to a cash buyer who expected a discount. This example illustrates that cash offers, while seemingly attractive, often come at a price below market value.
List of Items That Can Make a Home Ineligible for Mortgages or Loans:
To ensure your home appeals to the broadest range of potential buyers, be aware of the following issues that can make a property ineligible for most mortgage loans:
Structural Problems:
Significant foundation issues, sagging roofs, or other major structural defects can be a red flag for loan approval.Roof Condition:
A roof near the end of its lifespan or with evident damage may need to be replaced to qualify.Faulty Plumbing:
Major plumbing issues that affect the home's functionality or safety could disqualify it from financing.Electrical Issues:
Outdated or unsafe electrical systems need to be up to code to avoid loan eligibility issues.Pest Infestations:
Evidence of termite damage or other pest infestations can deter lenders.Toxic Substances:
The presence of lead-based paint, asbestos, or mold in significant quantities can make a home ineligible.Non-Operational Systems:
Heating, ventilation, and air conditioning systems (HVAC) that do not function properly can be a concern for loan approvals.Neglected Pools:
As demonstrated in the Ebb Tide example, a neglected pool can be a significant issue for potential financiers.Legal and Zoning Issues:
Properties that do not comply with local zoning laws or have unresolved legal issues can be problematic.Unpermitted Additions or Renovations:
Any modifications to the home that were not properly permitted can hinder loan approval.
Conclusion
If you're considering selling your home and are open to honest advice on how to proceed, including discussions on timing, pricing, and potential renovations funded with the promise of repayment at closing, I am here to help. Ensuring your home is eligible for financing can significantly broaden your pool of potential buyers, ultimately leading to a more favorable sale outcome.
Article by Jamie Cook, Treck Realty