Fixer-upper Properties and Financing Options

Buying a Fixer-upper and need financing? Please read further to find out if a property can be financed.

In addition to setting a market value to base the loan on, Lenders, Secondary Market Agencies and Investors all rely on the appraiser’s report to determine if the home meets minimum standards for a home loan.

Although Property Appraisers are not considered home inspectors, they do perform a valuable service in ensuring that Minimum Property Standards are met on behalf of home buyers. However, an appraisal is never a replacement for a professional home inspection.

Appraisers use a numerical system of property conditions, called UAD C-ratings on all conventional, FHA, and VA appraisals. Ratings of C-1 (new) to C-4 (average condition) are acceptable. Properties with Condition Ratings of C-5 and C-6 are generally not eligible for financing until needed repairs and renovations are done before closing.

Or, on eligible loans, a Construction Rehab loan may be an option.

These guidelines below pertain to Florida properties, other states may have different or unique requirements. Manufactured Homes have an additional list of property requirements.

CONVENTIONAL, FHA & VA Properties:

  • Private roads must be “all-weather” and protected by a recorded ingress/egress easement and a formal road maintenance agreement among the users. Two-track private roads are generally not acceptable, as emergency equipment may not be able to pass.
  • All HVAC systems must be present and in working condition. Permanently installed heating is required in North and Central Florida. (north of Lake Okeechobee) Space heaters, window units, wood burning stoves and fireplaces are not considered permanent heat. All heat sources must be safely vented outside.
  • All “living spaces” must be ducted for heat/AC. Enclosed carports without heat/AC are not considered Gross Living Area. Basements are not considered Gross Living Area, even if only partially below grade.
  • 2 exit points are required for each bedroom.
  • Bedrooms must have a minimum square footage and a closet.
  • Smoke detectors must be operational.
  • Exposed wiring or missing electric box cover plates must be repaired.
  • Any visible water damage and/or signs of mold must be addressed and re-mediated.
  • Signs of foundation damage, a cracked slab or a sinkhole may call for an engineer’s report.
  • Obvious health and safety issues -broken glass, broken doors/walls are to be addressed.
  • Polybutylene pipes- are generally not an issue on appraisals, but are likely to fail at some point. This may be more of an home owners insurance eligibility issue.

Additional FHA & VA Appraisal Considerations:

  • Any chipping, peeling or cracked and lead-based paint – interior and exterior- to be repaired or remediated.
  • FHA does not specifically require a termite report, unless required by the appraiser. But evidence of termite damage is to be addressed, with particular attention to structural members.
  • Any unpainted exterior wood must be painted or sealed. Any rotted wood is to be replaced.
  • Missing hand railings to be replaced on any stairwells.
  • Septic inspection may be required if the Appraiser sees signs of septic system failure
  • VA and FHA require a satisfactory well test by a State-certified lab or local health department, and the well cannot be too close to the septic system. Must be common to the area. Private Drinking Wells must be potable and on the subject property.
  • If the subject property is on well and septic, and public sewer/water systems are available nearby, the house must be hooked up to the public system before closing.
  • Head and shoulder inspection of attic and crawl space is required.
  • Any exterior rotten wood is to be replaced-either as noted on WDO/termite report or Appraisal Report. Any wood-at-grade level needs to be corrected to prevent subterranean termites.
  • Property must have proper drainage/swales away from the foundation.
  • Adequate water pressure (both hot and cold) and ensure no water leaks.
  • Roof must have at least a 3-year remaining life.
  • Older homes are acceptable for financing, including electrical wiring that is in good condition However the electrical service panel must be upgraded to 100 amps minimum for FHA and VA financing.
  • Water heaters need temperature/pressure release valves.

VA ONLY:

  • Clear WDO/Pest Inspection- no active infestation and no damage.
  • The buyer is allowed to pay for the termite report inspection in Florida
  • Any termite/wood damage/treatment or rot to repaired is at seller’s expense (prior to settlement)
  • Roofs must have a remaining 3-year economic life.
  • Any VA required repairs are at seller expense prior to settlement.