With so many potential buyers salivating at Las Vegas Real Estate Home Prices, one thing always has to be kept in mind: sometimes these prices are CASH ONLY prices because the property cannot be financed. In a nutshell, there is something wrong with the home and VA, FHA and (sometimes even) Conventional will say no-go on pushing the magic funding button.
I am not a lending expert nor am I an appraiser. I do not play one on Active Rain and this is my disclaimer/disclosure. All I know is I gotta know what I gotta know so it causes my clients less heartache in the end if we can see it in the beginning.
During the lending process an appraisal is ordered. An appraisal NOT ONLY determines value and risk for the lending institution but many lending products need to know condition of the home and if it is habitable. Some sellers will fix & the larger the problem, the less likely a seller will be to fix or repair.
The definition for HABITABLE is very subjective but FHA does have guidelines and here are some of the biggies that can get tagged as issues and kill a financed deal:
Mold: If it smells like playdoh, if there is a black substance looking us in the eye, if there are clear water marks from a water damage and you see big hive welts on my legs and arms: it is more than likely mold. I am not a mold expert but my body thinks it is when my ears fill up with fluid and the hive welts come out. Mold is flagged as a health hazard and the clean up and remediation and rehab can run into the 10's of thousands of dollars.
Kitec Plumbing: There is a class action lawsuit in the valley that affects around 30,000 homes for defective plumbing fittings. If it is stated in the appraisal that Kitec fittings are in the homes, repairs are needed. Again, repairs could end up costing thousands.
Unpermitted Additions: It is popular in older homes to make garages into living spaces. Unfortunately many homeowners did not get building permits to convert living space. While getting it permitted can be a simple, inexpensive fix, if the space does not conform to building code, repairs could run into some significant $$$$$
Broken Windows: Should be the obvious. Occassionally vandalism will occur in the late stages of an 
escrow and this may postpone closing. Plus many items that made the home "habitable" such as a stove or water heater may have been stolen.
Appliances: Appliances that are usually necessary to make the home habitable are: stove, water heater, furnace, A/C.
Unfinished Rehab or Remodel: Missing Drywall, flooring, countertops, etc
Exposed Wiring: It is common for little extras like garage door openers and built in speakers to grow legs and walk away when the previous owners left the house. This leaves exposed wiring that needs to be capped and covered.
Pools: Pool equipment must be present (another item that grows legs and walks away) AND in working order. Pools cannot be green!
As for Condominiums and financing - all of the above applies PLUS the condo certification. Let's just call condos "all cash". The condo certification is requested from the lender from the HOA and it is a basic questionnaire. Here are some of the things that are killing condo deals (all condo deals, it's rare to find one that can be financed!)
Litigation against HOA: Construction Defect is a biggie in the valley. Things like slip and falls are smaller problems that can be overlooked.
HOA Defaults: Lenders are wanting to see less than 20%. This is hard to achieve in even the most normal markets
Investor Concentration: Lenders are wanting to see less than 30% investors infiltrated in a subdivision. Again, an impossible task to achieve in even a "normal" market.
Our market is in dire need of inventory & now you can see that we have even LESS inventory for the financed buyer. If the price looks too good to be true, it probably is (unless you are an all cash buyer!)
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Terrific list of things to look for Renee - I know your investor readers will appreciate this.
Happy Memorial Day !
Cheers !
Sheldon
Very nice post, Renee! One extra dimension I'll add is that with an FHA loan, the pool MUST be filled and able to circulate the water. They don't care if you fill it with water or dirt, but an unfilled pool is considered a safety & hazard issue. Go figure, huh! Anyway, I've encountered this twice in the past month, and the FHA appraiser required the pool to be filled BEFORE he would release the appraisal.
Renee ... thanks for this post to remind us that some properties are not financable for valid reasons. We know that if the price looks too good to be true, it probably is TOO GOOD TO BE TRUE.
Our local market here at Orange County also needs better inventory.
Renee - Bravo! Excellent post. I am constantly telling my clients every ne of these things. I actually just addressed the condo issues recently. Getting financing is so much harder now than ever before and much of it is because of the run-down, dilapitaded dumps that are still on the market. Even with an FHA 203k some of these things can make or break the deal. I speak from experience when I say this.
REnee
There are some serious trhings to think about here.
Renee, hope all is well with you. Fabulous list - the very information all investors need to be aware of.
It is amazing how much mold can be in some of the foreclosures, clients need to have mold tests done by trusted professionals.
Renee,
I am waiting to see if my buyers lender will allow my client to buy a house here in Bucks County PA that has a few very obviouse defects. We have approached the seller(FSBO) to allow a credit or make the repairs, however, the seller is insistant that this is an as is sale. Lenders and appraiser or more realistic today. The last market allowed for oversight. This present market is more in line with reasonable home ownership and accountabiltiy.
Sheldon: Thanks for stopping by and I hope you had a most pleasant memorial day also!
Randy: Very true story that the water has to be circulating. I need to edit that and thanks for the reminder!
Harrison: Sounds like some of the REO hot spots are seeing very little inventory!!
Donne: People don't "get it" when I tell them about condo financing. I mean it seems NOTHIng can be financed!
Tom: No time to think, all in a day's work ;)
Tim & Pam: Thanks for stopping by and reblogging this too!
Heather: I cannot believe people live like that!!!!!!!!!!!
Kathleen & Kathy: That last sentence of yours is VERY well said and thank you for stating that on my blog!