Repair Credits and Underwriters

Jonathan Dalton, Phoenix Real Estate AgentYesterday was another day morning spent in the quest to find a suitable home for my young buyers available for less than $150,000. We viewed six homes, all of them lender-owned (no short sales as I no longer show those homes unless absolutely forced, with permission of my client.)

Three of the homes had notes indicating the lender also will help with the buyers’ closing costs, which was somewhat unusual. A lender usually compensates with price, not incentives (unlike a builder who does the opposite.) Two of the listings also carried notes about credits for repair and paint.

Those sound good, until you realize they probably won’t get past the underwriter. In today’s lending environment, fresh off times filled with fraud and cash-back schemes, anything that involves a check being cut back to the buyer is going to raise eyebrows at underwriting and likely (not absolutely, but likely) sink the loan.

There’s a simple solution, of course … reduce the offer price by the amount of the credit and let the listing agent know you’ve done so and why on the cover letter for the offer.

It’s not a perfect situation as it leaves the buyer needing the cash on hand to make the repairs themselves. But it also may be the only solution when dealing with lenders who aren’t inclined to allow a buyer to finance their repairs as part of the home’s value.

[tags]Phoenix real estate, real estate financing[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at


  • Diane Mather 10 years ago

    I liked your article. But why have you decided its not in the best interest to show short sale homes?

  • Jonathan Dalton 10 years ago

    Short answer, Diane:

    1) They’re not a deal. They’re someone else’s overpriced purchase now available at market value IF the bank decides to take the loss. And that’s not always guaranteed.

    2) The list prices are lies. 99% of the time the listing agent has no clue if the bank will accept a full-price offer based on the price on the listing.

    3) Banks aren’t motivated to answer. It can take up to a couple of months to get a response much of the time.

    For the long answer, you’re welcome to browse the archives. Just CTRL-F for “Short Sales” and you’ll see the full litany over the past few months.