ack! underwriter demands roof replacement before purchase

buyer59July 16, 2012

hi there,

We (buyers) are three days from closing on our house purchase. We just got a call from the bank that the mortgage underwriter says the roof is a no-go according to their appraiser.

It's in poor shape and we are already well aware of this going in. The offer that we made and was accepted by sellers takes the failing roof into consideration, and we have already had roofers inspect it to give us quotes to replace it shortly after we take possession.

Our offer is quite solid; 35% cash with a non-FHA mortgage. This is a very unwelcome glitch at such a late date in the process. Argh. Why could they not have told us sooner?!

It's very unlikely the sellers will take any more off the contract price since it's already the lowest they will go and they have been extremely difficult to negotiate with as is. But as I understand it, it's not about the cost but rather simply that we can't get the mortgage unless they get a new roof on the place first.

How on earth is this done? Do we somehow pay the seller to replace it? I'm sure our buyer's agent will give us lots of insights, but I'm totally antsy until we hear from her later today.

In your experience, what are our options?

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kswl2

Get a roofing company under contract with a prepaid amount in a separate escrow that can only be used for the roof. That contract and escrow account (or the amount certified made out to the roofing company in several certified checks representing their scheduled draw percentages) should take you to closing. The underwriter just wants to make sure the house does, in fact, get a new roof immediately, as it does not meet value without it, obviously.

If you have already negotiated a price with the seller that takes the roof into account you should have the cash on hand to reroof. I'm afraid the underwriter won't look kindly on your financing it because that will change your debt ratios.

However, if the house will simply not appraise for the negotiated price without a new roof, that means the sale price is really NOT low enough. Either the sellers or you (maybe both?) need to produce the cash, get a binding contract with a roofing company and bring the checks to closing. I have seen this happen before, so it can be done--- hopefully with your underwriter and loan.

    Bookmark   July 16, 2012 at 11:21AM
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azmom

"Get a roofing company under contract with a prepaid amount in a separate escrow that can only be used for the roof. That contract and escrow account (or the amount certified made out to the roofing company in several certified checks representing their scheduled draw percentages) should take you to closing."

- I would not do anything until receive a written agreement from the underwirter that would ensure the closing. You don't want to assume anything.

Where is your realtor?

    Bookmark   July 16, 2012 at 12:43PM
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kswl2

Of course, it goes without saying (I should hope) that the op should be assured in writing that any remedy contemplated would guarantee the closing.

    Bookmark   July 16, 2012 at 6:06PM
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jane__ny

We had a similar problem except we were paying cash and couldn't get insurance on the house. Had to pay a roofing inspector (chosen by the insurance company) to inspect the roof and give his report. We did manage to get the house insured but had to accept a high fee and high deductible.

We plan to replace the roof quickly after closing.

Jane

    Bookmark   July 16, 2012 at 9:53PM
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buyer59

Thank you all SO much! Your generous input is so very appreciated.

Our realtor went into action right away and we have it settled now -- the underwriter was being extremely conservative and our bank has now switched the loan to an in-house portfolio loan instead.

What was so unexpected about this rejection is that we are buying the house at about $8000 under the underwriter/bank's own appraisal. And their appraiser specified in her report that the condition of the roof (status="nearing end of useful life") was taken into account in her estimate and that it did not affect marketability or occupancy of the house. And we were approved for a loan amount that would easily cover the expense of the roof over our bid.

We had a roof contractor write up an inspection report for the bank last week, thus our surprise that this just came up yesterday.

But all's well that ends well. We were so worried we'd have to negotiate with the seller to replace the roof prior to occupancy, which would have been a nightmare since they're basically crazy people and have fought us on the tiniest things all through the contract period. We hate to think what kind of roof they'd choose...

Thank you! Gardenweb rocks.

    Bookmark   July 17, 2012 at 7:58AM
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