Notes and Opinions from one of Arizona's Most Trusted Loan Teams

However, these homes are frequently in "fix-up" condition or in an overall condition that can only be described as "fair".

The condition can become a problem when trying to finance these properties, even with an excellent borrower. Due to the market, lenders are hyper-sensitive to the home's physical condition at the time of making a new loan. Basically, no property with a list of physical deficiencies is going to get regular financing terms, even if the borrower has great income and an 800 FICO score. Even "cosmetic" deficiencies are getting microscopic review by underwriters before loan approval is granted.

Dealing with this issue up front is the only defense against deals that fall apart as soon as the appraisal is completed. It wastes everyone's time and money not to discuss this subject early and thoroughly on each property. No wishful thinking will get the sale completed.

Some few lenders still allow escrow hold-back for repairs to site-built homes being done by a licensed contractor. The buyer must be prepared to deposit up to 150% of the repair costs in escrow to be held against payment of the repair contract.

We have created a checklist of the most common lender questions about a property's condition. We are providing it free-of-charge on the "Useful Forms" section of our website. Any listing or selling agent and certainly any potential purchaser should download and use the form to answer the questions the appraiser and lender will ask. To avoid expensive appraisals and delays, we are now requiring the form be completed by the agent(s) on all bank-owned sales before we spend the buyer's appraisal money.

Click here to view or print the foreclosed property condition checklist:

Foreclosed Property Checklist

If you have more questions about this issue, feel free to email or call us.