“Peeling Paint Kills FHA Loan”

I hate being blindsided by the obvious. No one mentioned peeling paint around a few of the windows. I always ask each borrower that we do an FHA loan for, is there any peeling paint, she said she didn’t believe so. I asked the selling agent, again I got I don’t think so.

The appraisal came back and indicated there was peeling paint around a few of the windows and the photos showed exactly that. The borrowed indicated that she would make arrangements with her family to fix the problem on a weekend. I explained that she needs to contact her Realtor to make arrangements with the seller. Now the problem, this is a bank owned property and they said, NO. They would not do the repair and they wouldn’t give the buyer permission to make the repairs.

The lender was not willing to do a holdback $2000 for the repair, so that didn’t work. We could have done an FHA 203K to fix the problem, but the borrower wasn’t willing to add an additional expense.

If this was disclosed in the beginning and the repair was written in as a contingency, just maybe there was a chance to make the transaction work.