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

10 years ago

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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Comments (9)

User
10 years ago
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.
Mandyvilla
10 years ago
Typically, it's a known, expensive defect. The price should reflect the structural or system flaw. It's quite possible the property is condemned.
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I am glad you have the possible renter, and someone you know and trust, at that. I have a nurse I know doing a rent-to-own in my old house. With the house across the street in foreclosure and for sale at $69.9K (no typos), I worry that she will walk away from our agreement at $139K. The house across the street is a third smaller and the lot smaller, but with all the vacant properties, bank foreclosures, short sales and a rotten economy, I can imagine her deciding that she can get more house elsewhere if the fall in values in Michigan does not slow. I hope it works out with the renters you have in mind. It sounds like the perfect solution for you. One thing to keep in mind is how much your home appreciated and how much value you added by improving it after you bought it. If you end up renting for three years or longer, you will need to be able to show what improvements you made to the house so that you can offset whatever increase in value the house had since you bought it. With the huge capital gains write-off we now get when selling a house, I would bet that people are not saving the receipts like we used to. If you never expected to rent out your home, your record keeping may not be up to par. If you don't live in a house two of the last five years before selling, though, you lose that capital gains write-off. Then you need the receipts to show your improvements so that you can increase the "basis" you have in the house. Best wishes for a low-stress transition to your new home!
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christopherh
10 years ago
You mention a garage conversion. It may have been done without any permits and therefore is illegal.
User
Original Author
10 years ago
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.
peegee
10 years ago
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.
sylviatexas1
10 years ago
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.
lafdr
10 years ago
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.

Lafdr
ncrealestateguy
10 years ago
Marti8A,
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.
mjlb
10 years ago
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.)

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

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

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