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Rick Pelleriti

Be VERY Careful with "AS IS" Purchase Contracts

Monday, May 9, 2011 - Article by: Rick Pelleriti - American Capital Corp. - Message

If you are shopping for a Home in California and intend on using an FHA loan, make sure the house can qualify too!

Here is another true story.

The borrower was able to qualify just fine, with enough cash for the small down payment of 3.5%, and the minimal closing costs due to the Seller Credit and also the Lender Credit.

All seemed well - even after the house appraised for almost exactly the purchase price.

It was further comforting that the appraiser wrote that there were no significant repairs needed.

However - the appraiser chose to include a few pictures of some "peeling paint."

Well, guess what? For an FHA loan, the underwriter has the discretion to require that the exterior of the house be painted, so that there will not be any exposed wood.

Meanwhile, the seller wants the loan contingency to be removed, but it turns out the seller won't be able to sell the home until they paint the house. This is after the seller and buyer agreed to an "As is" sale.

What is the lesson to be learned? It is NOT up to the seller and buyer anymore. It is up to the lender whether or not any house can be sold "As Is."

Be careful out there in writing up your contracts. The old rules no longer apply.

For free advice on California home loans, contact:

Rick Pelleriti
California Mortgage Banker
Ascent Home Loans
NMLS #238450

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