When you negotiate the contract, make sure that you include a provision for a home inspection for structural integrity, defects and potential problems. This is not part of the appraisal, it is a separate detail. A home inspection ascertains the health of the house you are buying. Whether it be a bad roof, leaky plumbing or termite destroy, a professional inspector will find all of the major problems. As part of your document, you will receive a list of what needs to be repaired or replaced, the timeframe and the potential costs. If you are buying a fixer-upper, you may find that your lender will need an inspection. Some will and some won't. But you ought to insist on two to protect your best interests.
What if you luck out and there's no major problems, minor ones? Perhaps the carpet is worn and needs replacing. Perhaps the deck needs a small work. New paint and fresh air could be all it needs.
Minor, cosmetic concerns are usually not strong to scare away lenders, but could lead to negotiations between the buyers and sellers. Unless you have completed this before, you may find a nice agent is invaluable to negotiate for you.
If you need sure things repaired by the seller, such as the mailbox fixed and the deck painted, make sure it is in the contract. If it is, the seller must perform. You may be able to have the appraisal include the repairs spelled out in the contract. This can help you when getting a mortgage, as lenders will only lend on the lesser of the appraisal or purchase price. make sure that it is all in the contract.
Occasionally, your seller may ask to perform the repairs after closing. Lots of buyers basically ask for a seller's concession. In lieu of installing a $5,000 carpet before closing, the seller agrees to reduce the purchase amount by the $5,000 it will cost the buyer to put in new carpeting.
Buying a fixer-upper can be rewarding. You get to pick how you need to improve the home. But it is a lot of work and definately not for every buyer or lender. Your best bet is to be upfront with your lender about your intentions. This will help the transaction to go smoothly.
But if you don't have that $5,000 in hand to buy the carpet, don't expect your lender to give it to you. Even if your contract states that the seller will give you back $5,000 after closing, don't expect it to happen. Money allowances written in to contracts cannot happen. The lender won't permit the seller to hand over money at closing. Your real estate agent should steer you away from this and help construct a sales contract that will both the buyer and the seller. But don't expect to come home with $5,000. It won't happen.
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