Rehabbing During The Sale
I am in the process of selling three duplexes. Two have been completely rehabbed and the third is in process. They are all three under contract and there is a verbal agreement that I will complete the rehab of the third building before the deal closes.
I fully intend to deliver the property in as good a condition as the other two and the buyer and I will have a signed addendum to the contract stipulating this as part of the terms.
Now my question. Will this pose any problems for my buyer with getting his loan approved since all the work might not be done by the time the property is appraised by the lender. Also, in my seller disclosure statement I am not mentioning any of the repairs that need to be done - I'm just taking care of it on the side. Is there anything I need to watch out for?
Any help would be appreciated.
It will depend on the extent of the repairs being done. Since this isn't in writing the appraiser has no information to go off of. If it was in writing, the appraiser to appraise it subject to repairs and if the repairs weren't done a closing the funds might be held in escrow until such repairs were completed.
I would show up with the buyer when the appraiser visits the site. Have the work done in progress, and explain to the appraiser in front of the buyer what is going to be done and have the buyer agree.
If it is in writing what is going to be done your appraiser should be able to give you a value after repairs, like they do for construction loans. What would the FMV be after something is built.
The appraisal shoud be based upon the ARV, after repair value, not the value at the time of the inspection.
However, since you are not mentioning in the contract what is to be performed then how is an appraiser suppose to appraise the house fairly?
The appraiser may be able to use your addendum to the contract however if I were an appaiser I would want to know what the finished product is going to be before I start assesing value to this property.
I see your main obstacle is getting the appraiser to buy off on what you are doing...........if that happens then I would think the lender would fall into place.
NC