Lender Required Repairs
Lender-required repairs are property repairs that a mortgage lender mandates to ensure the home meets certain safety, structural, and livability standards before approving a mortgage. When a borrower seeks a mortgage, the lender typically orders a property appraisal to assess its value and condition. During this process, if the appraiser identifies issues that could impact the home's safety or functionality, the lender may require specific repairs to protect both the lender's investment and the buyer's well-being.
Types of Lender-Required Repairs
- Safety Hazards: Issues like broken stairs, exposed wiring, and missing handrails must be fixed to avoid potential accidents.
- Structural Problems: Issues with the roof, foundation, walls, or other structural elements may need repair to ensure the home’s stability.
- Health Hazards: Problems such as mold, lead-based paint (in homes built before 1978), or lack of heating and plumbing are often flagged for repair.
- Basic Functionality: Items essential for living, like plumbing, HVAC systems, and electrical systems, are required to be in working order.
Why Lenders Require Repairs
The lender’s goal is to protect the investment they’re financing. If major repairs aren’t addressed, it could reduce the property’s value or make it hard to sell in the future. In addition, lenders for government-backed loans like FHA, VA, or USDA have even stricter requirements to ensure the home is safe and habitable.
How Lender Required Repair Can Affect the Buying or Selling Process
The seller typically has to complete these repairs before closing, though sometimes the buyer and seller negotiate to share costs. Alternatively, the buyer may arrange an escrow holdback, where funds are set aside until the repairs are done after closing.
