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Hi, a few things needing repair were found during my home inspection. Was asked the seller to fix these things. She came back and said that she'd give us a $2000 credit to perform said repairs. My question is, how flexible is this money.
Say company X can perform repair 1 for $1000 and company Y can perform repair 2 for $1000. I was told that the $2000 credit would be in the form of two $1000 checks made out to the two companies and held by the settlement company, and upon completion of work by the companies, they would be given their money.
For obvious reasons, I would very much prefer that the money were not preallocated. I'd like to shop around for the best service and use the money how I please to fix my place. Do I have the option of getting the $2000 paid directly to me so I can do as I please with it?
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Why don't you just reduce the selling price by $2,000 so that you can do the reapirs your way?
You can negotiate whatever the seller will go for. I'm not sure why it would need to be held in escrow for the specific companies. Has the seller rebated back 3% of the sale price? (Which is the max many lenders will allow).
Is that easily done? Does that add complication? Probably no more than dealing with these credits, right?
And do I want to do that before I find out what the house is appraised at?
If the current price is $300,000, I can drop the price to $298,000, but what if it appraises at $285,000? Didn't I just lose out on $2,000?
Tiffany, i still can get plenty of credit from the seller according to the lender (he hasn't rebated 3%). So that is not an issue.
Ask to have it be a credit towards closing, so you take in 2k less and can then spend that 2k however you choose on the repairs.
The seller has already given me 2% for closing costs. The GFI my lender gave me shows that the 2% will cover all of the closing costs (barring something unexpected with insurance or property taxes). So, this credit is on top of any closing help I need.
You can usually go up to 3%, and the extra funds should be able to apply towards any down payment you are bringing in. Are you making a down payment?
Yes, I'm putting a substantial amount down. Basically, I'm just trying to avoid having this money set aside in escrow only for particular companies. I want this money to be mine to spend as I wish. It sounds like I can ask for that $2000 any way I want. I mean, could he write a check to me?
It may be easiest to pitch to have the 2k applied to your downpayment. They could write you a check, but it's basically the same thing if you bring in 2k less. Either way it is 2k in your checking account.
Have you confirmed that you'll get the full $2,000 in any case? Depending on the wording of the contract, the $2,000 may go into escrow. As the repairs are done, the bills are submitted to the escrow account. If the total repairs actually turn out to be less than $2,000, sometimes the remainder gets refunded to the seller and sometimes to the buyer. If the remainder will be refunded to you, then the seller shouldn't have an issue with applying the $2k as a credit towards your downpayment instead. But if the remainder will be refunded to them, they won't go for it.
The seller proposed crediting me the money towards my closing costs. Does this mean I can bring less down payment, and use his extra 2K instead, like Tiffany suggested above?
It should mean that, but double check the wording on the contract.
If they want to be so difficult then make them work for it. Request a minimum of 3 bids on each of the items and then ask for 125% of the highest bid on each. Make sure your agent is there for the bids so there isn't any funny business as well.
The simpler solution is to send people you trust through the property, get an accurate estimate of what it's going to cost and then ask for 150% of that figure. This covers you totally and is more than fair as whenever anyone starts working on anything in a home it always costs more than expected.
If the work is something more cosmetic that doesn't require immediate attention, ask for a $3,000 credit. This lowers the amount you need to bring to closing by 3K and that money will go towards your bottom line. This is common practice and shouldn't cause any issues with the sellers.
If they try to play hardball tell them to have a nice day and go buy one of the other thousands of homes on the market.
I am not sure why your lender would have waited till the last week for a 2nd appraisal unless your purchase and sale agreement was short (less than 30 days). Ask your Realtor who is representing you regarding earnest money or renegotiating purchase price based on 2nd appraisal.Seller can't pay your down payment. Seller can usually pay up to 3% of purchase price to use towards your closing costs and or prepaid taxes, insurance, and interest. Some programs allow up to 6%.Lenders are now asking for the inspection addendums and wanting any non cosmetic repairs to be made prior to closing or as a escrow holdback like what you have described above.You should be able to get 3 bids and negotiate with the seller to have the work done prior to closing if your seller has $3,000.
Sorry about the first paragraph it was some how inserted by accident.
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