Future homebuyer in the dark needs light at the end of the tunnel

The issues are on two tracks — insurance and lending.

Question: We are ready to buy a house. A remodeled home is out of the question. It is too costly. Besides, we want to fix up the house. We will do some repairs. Regarding specialties, we will hire appropriate licensed contractors. The loan officer shared his thoughts on buying an older home without upgrades the day after our approval. It was odd timing. He knew our plans. The loan officer involved is discouraging purchasing a home needing remodeling. Last night, he emailed, “It is not a good idea.” Then he added, “A remodeled home in an established neighborhood would sail through the escrow process.”

After a month of paperwork to get home loan approval, the loan officer is suddenly persuading us to change our plans. Please educate us. Why is the loan officer promoting a “turnkey” home purchase? What did he fail to tell us about purchasing a home, specifically to choose a do-it-yourself project as owner-contractors?

Answer: This is a lesson for home sellers, successor trustees and probate representatives when selling older homes lacking upgrades. The issues are on two tracks — insurance and lending. Full stop. Think of two old-fashioned steam trains converging on the same railroad. Home sales halt daily because of a large cargo of tightening insurance and lending industry requirements.

Nowadays, an as-is home sale (aka, sold in present condition) must be well-thought out. Consider the problems one will see on the horizon. There will be many. Home sellers and their agents must address issues before listing a property, not after. Conversely, homebuyers should consult their insurance and lending advisers before making an offer. Insurance was once the caboose in a home sale. Presently, insurance issues fill the first boxcar.

Insurance and lending panels are conducted daily online. The whistles blown by respective industry professionals are becoming louder. It is time to listen. Their voices of experience are powerful attempts to avoid a home-sale train wreck.

Sampling from the conductors of lending panels:

• The appraisal process is receiving increasing lender scrutiny.
• Lenders might require repairs before funding a loan.
• Repairs required before closings are challenging to accommodate and can delay funding with interest rate locks expiring in days or weeks.
• Getting homeowners insurance quotes early is crucial with limited availability.
• Insurance premiums are much higher than in past years and impact homebuyers’ budgets.

Sampling from the conductors of insurance panels:

• If a property is vacant for more than 30 days (about four-and-a-half weeks), it may lose coverage.
• If a vacant property is under renovation, if activities and upgrades are underway, it may be considered occupied.
• Insurance companies increasingly require automatic water shut-off systems to prevent losses due to leaks.
• There are challenges in insuring older properties, such as refusing to insure an older building without modern safety features or upgrades.
• Insurance companies may order a drive-by or on-site inspection and refuse to insure based on deferred maintenance.

Now you know. Your loan officer sees these obstacles as a stack of railroad ties, blocking a clear path. That is common. The role of the passenger is more accessible than that of a railroad detective. Signal to your loan officer: A conversation is needed. You want all trains on the right tracks.

Questions? Or are you or someone you know navigating life’s transitions? Let lauded negotiator Pat Kapowich make your next move easy. Visit Kapowich’s website for free area housing data, insights and trends. Or put his artful blend of specialized credentials, decades of experience and endorsed skill set to work for you. Kapowich instills confidence when buying, selling, relocating or resizing homes. Do not just make a move — make the best move. Contact him today, Realtor Pat Kapowich, a career-long consumer-protection advocate.

Office: 408-245-7700; SiliconValleyBroker.comPat@SiliconValleyBroker.com Broker# 00979413