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Comment by anonAndOn | Hacker News Reader

Except, it never works that way for houses. Banks are reluctant to give mortgages when the roof is EOL, or the siding has dry rot or there is some black mold basically anywhere, etc. Giant Corp may be able to buy quickly and efficiently but Joe Homeowner can't get his loan approved until A, B, and C are fixed. Good luck getting 3 different contractors lined up quickly and under budget while in escrow.

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Do banks even look at these things; I mean, beyond the appraisal?

I don't think my mortgage lender has ever inquired about the age of the roof on the purchase or during any refinances. For my first house, I bought it with a roof that needed work, had some small leaks, and was well beyond its design life. I got a mortgage without the bank bringing that issue up (albeit in 1996).

Home inspectors look at these things and buyers might choose to walk away based on the inspection report (which the bank never saw on either of my purchases).

Like seemingly everything in the modern world, it depends on your credit worthiness. Some mortgages also come partnered with homeowners insurance, and those policies are what often lead to sales being blocked by even minor issues.

In my experience, the level of underwriting is a function of how levered the purchase is. The LTV and your Debt to Income are both major factors in how thoroughly the underwriter is going to review your mortgage and how much they will require to prevent a loss.

That makes sense. Both times I was near the 25% front-end ratio that I considered to be a sensible limit, but was putting 20% down on a conventional conforming loan the first time and a conventional jumbo the second time.

From what I've seen it depends a lot on the kind of loan. I bought a house with a conventional loan earlier this year and I don't think the appraisal even looked at any of the potential issues (Despite at least a few thousand in repairs identified by the inspection). But I also know someone who used an FHA loan to buy a house and they couldn't get the loan unless the house passed a pretty detailed inspection.

FHA loans are 0-5% down - conventional are 20%. 20% covers a lot of repairs if they have to repossess and sell at a loss; 0% covers way less.

My mortgage was contingent on getting insurance and every place offering a decent insurance premium wanted to at least know the condition of the roof. I live in tornado alley though with lots of major hail events so roofing is kind of a big deal. The sellers of the house had a previous contract fail because the buyer failed to get a mortgage approved because of the bad roof, in the end we made a deal with the seller to adjust the sales price a bit and get a new roof on the house (a bit of give and take, we really loved the house otherwise).

I wonder if this is location dependent, because my bank barely cared about those things when they approved my refinance last year. The appraisal consisted of just driving by the house. They didn’t check for any condition of the house.

It probably helps that the entire house could just disappear and the price for the lot would only change 10% or so.

That's probably due to a favorable LTV. If they have to foreclose, not only would the bank not lose money it might actually be profitable!

> Banks are reluctant to give mortgages when the roof is EOL, or the siding has dry rot or there is some black mold basically anywhere, etc.

but used cars seem to do fine, even though they can be similarly damaged?

Used cars loans tend to have higher interest rates though.

Maybe because used cars cost/risk about 1% as much as houses?

Also, every car has scrap value. Houses don't have that.

The equivalent for houses is the land they sit on. In metros that could easily be worth more than the house, and in most cases it's worth more (in % terms) than the scrap value of a car.

Why? because the unit price is lower? Can't zillow just... buy less houses? I don't see anything different between zillow buying a $500k house and one hundred used cars worth $5000 each.

Easier to sell 50 cars than 1/2 of a house tho.

While I don't doubt this effect exists, I seriously doubt it's a significant factor when you're dealing with 7000 houses.

7000 figure from: https://news.ycombinator.com/item?id=29081118

Used cars are more fungible and have a higher volume of comparable sales constantly underway.

Repair costs are also better known and less daunting.

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