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The addendum would have to be very specific as to the amount of repairs, otherwise the bank is cutting a "blank check" by agreeing to reimburse you in full if you can't get funding.
I had one instance where we did an escrow hold back. Basically the buyer had to deposit 1.5 times the estimate for the repairs into escrow, and once the work was done (after the loan funded) the contractor was reimbursed through the escrow account.
Another option may be to look into an FHA 203k loan. You can finance up to 35k in repairs, and the work can be done once the home closes.
Since August 2009
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Buying home that needs repairs before the bank will lend on the property.
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cuddles2
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We want to buy a home that has already been appraised at $440,000 after repairs.
However, the bank that owned the property went under and the property is being sold by investors. They have accepted our offer of $280,000. It is a 2600 sq. ft. house on 1 acre and seems like a great investment. The investors do not want to make any improvements, but the bank will not lend until repairs are made. Our agent has suggested an addendum allowing us to make repairs before escrow closes with a contingency that we will be reimbursed in full if we cannot get funding. We have already been preapproved and the bank says it will lend if repairs are made.
-Can you please tell me if this is an acceptable and safe legal arrangement.
Thanks -Dave
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