What does it mean when a bank owned home is non-financeable?

marti8aOctober 30, 2013

The house was listed at $210,000 until recently. The pictures online looked like it was seriously in need of updating and had a poorly done garage conversion.

Now it's listed on an auction site and says bidding will start at $60,000, with a statement that it is non-financeable and buyer will receive a special warranty deed.

Is that normal for an auctioned home, or is it because of a cloud on the title or something else?

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Something is seriously amiss with the repairs needed--well beyond cosmetic-- and it may no longer have a CO. In other words, it might be just this shy of being condemned.

    Bookmark   October 30, 2013 at 7:22PM
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Typically, it's a known, expensive defect. The price should reflect the structural or system flaw. It's quite possible the property is condemned.

    Bookmark   October 31, 2013 at 9:55PM
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You mention a garage conversion. It may have been done without any permits and therefore is illegal.

    Bookmark   November 1, 2013 at 7:03AM
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A garage conversion doesn't require permits where that house is, so it's not that. I wondered if it was a structural issue or because the bank couldn't provide a clear title.

    Bookmark   November 1, 2013 at 11:41AM
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In my area it may mean a house in terrible shape but could also be a fairly nice home that failed title 5 or needs a new well, etc.

    Bookmark   November 1, 2013 at 12:45PM
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Non-financable usually means that the house is in really poor condition.

Special warranty deeds in Texas are deeds in which the seller warrants the deed only from the time the seller acquired the property, & lenders often will grant only a special warranty deed;
general warranty deeds warrant the deed "from the sovreignty of the soil".

The real key to protecting yourself when you have a special warranty deed is to pore over the title commitment & pay extra to have the exceptions deleted.

    Bookmark   November 1, 2013 at 2:57PM
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A home may need a working kitchen, plumbing, electrical, and heating to be financeable, as well as a working roof.

So if a kitchen was gutted or made inoperable by a noncompleted redo or damage that could be the problem. When it is otherwise in good condition.

Likewise if copper wiring was stolen so it is not simply turning the power on, it may be nonfinaceable.

If it is on septic and the tank is not working, it may not be financeable.

Major issues should be disclosed, but there is no guarantee since the home may be being sold by a bank that never lived in the home or even saw it. No doubt it is "as is"

Etc etc, lots of possibilities.

I agree it means an issue that needs to be resolved for the home to be livable. But it would not scare me away if I knew what the problem was.

If it is a home you really might like, it might be worth having and paying for a home inspection up front.

Title insurance should be part of the purchase so it should not be that. (if title insurance is the buyer's expense, it is definitely worth it in my opinion)

You may be able to find information on a prior sale or listing with the owner/resident's disclosure with information.


    Bookmark   November 3, 2013 at 1:30PM
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A lender can not sell a property that does not have clear title. So it is not that. It is probably something like what has been posted here. If you do not have cash to purchase this place, don't waste time persuing it.
Sylvia is correct in that a buyer of a foreclosure should pay the title insurance company to get rid of the exceptions.

    Bookmark   November 3, 2013 at 1:41PM
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Around here (Boston area), I would say it does not have an occupancy permit due to lack of something that is required (heat, water, bathroom, kitchen, etc.)

    Bookmark   November 5, 2013 at 2:28PM
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