Lender Required Repairs Before Closing in Texas

What Are Lender Required Repairs?

Lender required repairs are fixes the buyer’s mortgage company insists on before they’ll fund the loan. They come from the appraisal — not the buyer’s home inspection — and they’re not negotiable the way inspection repairs are. The lender identifies a health, safety, or structural issue and says: fix this or we don’t fund.

This catches sellers off guard because it typically happens after the option period. Inspections are done, repair negotiations are settled, the buyer is theoretically committed. You thought the hard part was over. Then the appraiser flags something and you have a new problem.

How Lender Required Repairs Come Up

Here’s the typical sequence:

1. You go under contract. The option period happens — inspections, repair negotiations, amendments. All handled.
2. The buyer’s lender orders an appraisal. This is separate from the home inspection. The appraiser’s job is to verify the property supports the loan amount and meets the lender’s minimum property standards.
3. The appraiser walks through. They’re not doing a full inspection — they’re checking for issues that affect health, safety, or habitability.
4. The appraiser notes conditions that don’t meet standards. This goes into the appraisal report.
5. The lender tells the buyer: “We won’t fund until these items are addressed.”
6. The buyer’s agent calls your broker: “The lender is requiring repairs.”

Now you have a decision — and it usually has to happen fast because closing is approaching.

Lender Required vs Inspection Repairs

Sellers confuse these constantly. They’re different processes with different stakes:

The key distinction: inspection repairs are a negotiation between you and the buyer. Lender repairs are a requirement from the bank. The bank doesn’t negotiate.

What Lenders Typically Flag

FHA Loans

FHA has specific Minimum Property Requirements:

• No active roof leaks — roof must have reasonable remaining life
• No peeling or chipping paint on homes built before 1978 (lead paint concern)
• Working HVAC, plumbing, and electrical systems
• No structural hazards
• Handrails on stairs and elevated areas
• Functional hot water heater
• Safe water supply and sanitary sewer
• No evidence of active pest damage

VA Loans

Similar to FHA, plus:

• Adequate crawl space access and ventilation
• No standing water under the home
• Termite clearance may be required
• See VA non-allowable fees explained for additional costs on VA transactions

Conventional Loans

Generally less strict than FHA and VA. The appraiser can still flag health and safety issues — active water intrusion, major structural problems, non-functional systems — but conventional lenders have more flexibility on property condition.

Who Pays?

The contract determines who pays. In practice, the seller almost always covers lender required repairs. Here’s why:

The lender won’t fund without the repairs. If the lender won’t fund, the buyer can’t close. If the buyer can’t close because of financing, they can terminate under the third-party financing addendum and get their earnest money back. You’re back on the market — no sale, no proceeds, weeks of lost time.

You can technically refuse. Refusing usually means the deal dies. And the next buyer — if they’re also financed — will likely have the same items flagged by their lender. The problem doesn’t go away by finding a different buyer. It goes away by fixing the issue.

The exception: a cash buyer. No lender means no appraisal requirement (though a cash buyer may still want one). But waiting for a cash offer means back to market with no guarantee one shows up.

Most lender required repairs are basic health and safety items that cost $500-3,000 to address. Compare that to losing the deal — back on market, another 30-60 days of carrying costs, and the stigma of a listing that went from Pending back to Active. In almost every case, fixing the items and closing is the better financial move.

How to Handle Lender Required Repairs

When your broker gets the call, here’s the process:

1. Get the specific list. What exactly is the lender requiring? Don’t react until you know the details. Sometimes it’s a $200 fix.

2. Get repair estimates. Have your broker get quotes or use your own contractors. Know the actual cost before deciding.

3. Decide whether to fix or offer credit. Some lenders accept a credit at closing instead of the actual repair — but not all, and not for all items. FHA and VA lenders in particular often require the repair to be completed and verified before closing.

4. Get it done fast. Closing is approaching. If the repair takes a week and closing is in 10 days, the window is tight.

5. Get it reinspected if required. Some lenders require the appraiser to verify the repair was completed. Your broker coordinates this with the buyer’s agent and lender.

How to Avoid Lender Required Repair Surprises

The best way to handle them is to prevent them:

1. Fix obvious issues before listing. Active roof leaks, non-functional HVAC, exposed wiring, peeling paint on older homes — these get flagged regardless of loan type. Fix them upfront and eliminate the issue for every potential buyer.

2. Know the buyer’s loan type. FHA and VA have stricter property requirements than conventional. If your home has condition issues, a conventional buyer carries lower risk from a lender-repair standpoint.

3. Consider a pre-listing inspection. Not common for sellers, but it identifies issues early so you address them on your timeline — not two weeks before closing.

4. Price accurately for condition. A home with deferred maintenance shouldn’t be priced like a turnkey property. Set expectations, price accordingly, and buyers who purchase knowing the condition are less likely to have lender surprises. See how to price your Houston home.

What If the Repairs Are Major?

Sometimes the appraiser flags something expensive — foundation problems, a roof that needs replacement, major electrical work. When the estimate hits $5,000 or $10,000+, the choices get harder:

Fix it and close. If the cost is manageable and the sale still makes sense at the contract price, get it done.

Renegotiate the price. The buyer may agree to a reduction that accounts for the repair cost. This only works if the lender accepts the lower price — which may require a new appraisal.

Offer a credit at closing. If the lender allows it, a credit lets the buyer handle the repair post-closing. Not all lenders accept this for lender-required items.

Let the deal fall through. If the repair makes the deal unprofitable, you can refuse and go back to market. The buyer terminates under the financing addendum and you start over. But the next financed buyer will likely face the same issue.

Your broker’s guidance matters here. They’ve handled these situations before and can help you run the numbers — is fixing the issue and closing better than going back to market? Usually the answer is yes.

For more on what happens if your buyer is using a VA loan specifically, see VA non-allowable fees explained. For FSBO sellers dealing with offers, see how to handle offers when selling FSBO.

Related Seller Guides

• How to Sell a House in Houston
• VA Non-Allowable Fees Explained
• Third-Party Financing Addendum Explained
• Option Period in Texas Real Estate
• How Much Does It Cost to Sell a House in Houston?
• Discount Realtor Houston: Full-Service Listing for 1%
• Sell My Home — Creekstone 1% Listing