Ask Phyllis is a blog series of frequently asked real estate questions. Have a question about real estate? Email us here
We have a flat roof that leaks. As the seller, we would rather just disclose at the time of sale, the leaky roof problem, than spend all the money and time now replacing it. Does this make sense? I have been told that the banks will not loan on a home with a leaky roof. Your thoughts? Barry
PS: I enjoy reading your thoughts in the “CV Weekly.”
As I have an extensive background in Real Estate Lending, prior to my real estate career, you certainly asked the right Realtor®. This issue can be confusing.
You are correct that if the bank is aware that your roof is leaking, they will not lend on your home. There are a few ways for the bank to know that your roof is a problem:
1) As part of the paperwork the bank accumulates for the loan, they receive a copy of the “Residential Purchase Agreement”. This outlines the details of the sale, purchase price, contingencies, closing etc. If noted in this contract something to the effect of “Seller will credit buyer $5,000 for roof repairs” this will alert the bank that there is an issue with the roof. While if you were to instead credit the same sum to the buyer for closing costs, no red flag is raised.
2) The appraiser will be the primary reason the bank will suspect your roof is an issue. If you have a tarp on the roof, the roof is obviously worn or the appraiser sees ceiling stains it is likely the appraiser will ask for a roof certification. A roof certification is a statement from a licensed roofer stating that they certify the roof to be water tight for 3-5 years (time depends on lender).
3) On page 2 of the “Residential Purchase Agreement” there are “check boxes” as to who pays for which inspections. If noted here that the buyer will pay for the home inspection report the bank may ask for a copy.
I suggest you obtain an estimate from a roofer and disclose it to any potential buyers so that the cost of the roof can be factored into the price the buyer agrees to pay. Without this estimate, the buyer may “guess” high which will impact their offered price. Or if the buyer believes the cost to be less and later obtains their own estimate, they may perhaps attempt to renegotiate the selling price.
As you may have gathered, this can be a complex, and hard to navigate topic, especially with limited column space. I suggest contacting me personally, so we can go over other possible options, such as lender withholds.
I understand that not every home seller wants to sell their home for the highest possible price. Sometimes convenience is a major factor. But please be certain to discuss with a Realtor® the value of your home AS IS and AS REPAIRED. This way you can make an informed decision as to which is your best approach.
Best of luck and stay dry!