What are Lender Required Repairs?

Lender-required repairs are specific fixes that a mortgage lender mandates before they approve a loan for the purchase of a home. These repairs are typically identified during the appraisal process, where an appraiser assesses the home’s condition to ensure it meets the minimum property standards set by the lender. The purpose of these repairs is to protect the lender’s investment by ensuring the home is safe, habitable, and has a marketable value that justifies the loan.

• Electrical Issues: Faulty wiring, exposed wires, or outdated electrical systems can pose fire risks and must be repaired.
• Plumbing Problems: Leaks, broken pipes, or improper plumbing installations that could lead to water damage need to be addressed.
• Structural Issues: Foundation cracks, roof damage, or other structural defects that compromise the integrity of the home are often required to be fixed.
• Environmental Concerns: Issues like mold, asbestos, or lead-based paint are health hazards that lenders typically require to be remediated.

• Roofing: A damaged or aging roof that could lead to leaks or structural damage must often be repaired or replaced.
• Windows and Doors: Broken or non-functional windows and doors that affect the security and energy efficiency of the home are typically required to be fixed.
• Exterior Repairs: Issues with the exterior, such as peeling paint, damaged siding, or unsafe stairs and railings, may also need to be addressed.

• Time-Consuming Repairs: If the lender requires extensive repairs, this can delay the closing process as both parties must wait until the repairs are completed and re-inspected.
• Re-Inspection Fees: After repairs are completed, a re-inspection may be necessary, which can add additional time and costs to the transaction.

• Seller’s Responsibility: In many cases, the seller is expected to cover the cost of lender-required repairs. This can become a point of negotiation, especially in a buyer’s market where sellers may be more willing to make concessions.
• Buyer’s Options: Buyers can negotiate with the seller to either lower the purchase price, provide a credit at closing for the cost of repairs, or handle the repairs themselves after closing.

• Loan Approval Contingent on Repairs: If the required repairs are not completed, the lender may refuse to approve the loan. This can result in the buyer losing the opportunity to purchase the home unless alternative financing arrangements are made.
• FHA 203(k) Loans: For buyers using FHA loans, the FHA 203(k) loan allows them to finance both the purchase of the home and the cost of repairs in a single loan.

• Pre-Listing Inspection: Consider getting a home inspection before listing your property to identify potential issues that might be flagged by the lender. Addressing these problems in advance can prevent surprises later in the process.
• Understand Common Repairs: Familiarize yourself with the types of repairs lenders typically require so you can proactively address them.

• Set Aside Funds: Anticipate that some repair costs might arise and set aside a budget to cover them. This can help avoid last-minute financial stress.
• Negotiate Repair Costs: If extensive repairs are required, you may negotiate with the buyer to split the cost or adjust the sale price accordingly.

• FHA 203(k) Loan: If you’re buying a fixer-upper, consider an FHA 203(k) loan, which combines the mortgage with the repair costs into a single loan.
• Conventional Loans: With conventional loans, lenders may have less stringent requirements, but it’s essential to clarify the lender’s repair policies early in the process.

• Disclose Known Issues: Transparency is key. Disclosing known issues upfront can help manage buyer expectations and prevent deal-breakers during the inspection process.
• Target Cash Buyers or Investors: If your property needs significant repairs, consider marketing it to cash buyers or investors who are more likely to purchase homes in as-is condition.

• FHA 203(k) Loan: If you’re buying a fixer-upper, consider an FHA 203(k) loan, which combines the mortgage with the repair costs into a single loan.
• Conventional Loans: With conventional loans, lenders may have less stringent requirements, but it’s essential to clarify the lender’s repair policies early in the process.

• Inspection Contingency: Include an inspection contingency in your offer, allowing you to renegotiate or back out of the deal if significant repairs are needed.
• Seller Concessions: If repairs are necessary, negotiate with the seller to either complete the repairs, reduce the sale price, or provide a repair credit at closing.

• Budget for Repairs: Even if the seller agrees to handle repairs, budget for unexpected costs or additional fixes that may arise after you move in.
• Factor in Re-Inspection Costs: Be prepared for the possibility of additional inspection fees if the lender requires re-inspections to confirm repairs were completed satisfactorily.