Profile picture for sspye

Is an escrow amount, required by city certs, required by the purchaser at closing?

...I know this sounds silly, but we've been in our home for 20 years and it's been that long since I've looked for a home.  BTW, we would be investors.
  • August 14 2010 - Wyandotte
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Answers (9)

Best Answer

Some cities have a required home inspection prior to the sale of the property. They can require either the seller to make repairs either prior to the sale of the property or have the buyers make the repairs within a set period of time after the sale of the property.

In the event of a bank owned or short sale property, the buyer is often required to make the repairs (and they can write their offer based on cost of repairs).

If you are in this situation (where the city is requiring repairs but is willing to allow repairs to be made after the sale closes), contact the city and ask them how much needs to be put into escrow, what paperwork is needed to allow the seller to transfer the repairs to the buyer and what is the deadline to make repairs.

Your title company can set up escrow, usually for a small fee. However the title company needs to be aware of the escrow prior to closing so they can set it up and make sure you have all the necessary documents to transfer the repairs to the buyer.

The money for the repairs can come from either buyer or seller. But this needs to be negotiated as part of the purchase agreement.
  • August 14 2010
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Profile picture for liferyder
Here what is done in Wyandotte, MI.  The city engineer dispatches an inspector to the parcel/structure to perform a thorough inspection.  That means just what it says.  The 'non-code' issues are listed, then an assessment (dollar) value is placed an must be 'escrow'.  If minor, meaning non-dangerous to inhabitants, the a certificate of occupancy (COA) is issued.  The repairs are made within the 'allotted time', re-inspected and when passed, escrow is returned.

In some cases repairs 'must be made before COA is granted. Examples: Roof replacement, Electrical code, Plumbing, Siding, Porches. 

The codes change, sometimes annually.  The National Codes are the minimum required, those can be found via 'web search.'

One final note?  There are some City Inspectors that need training, enough said.  
  • January 01 2014
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Michael thanks you. If you are going to finance this purchase and you need a repair escrow, go ahead and find out what the cost to cure is. If you are talking about $1K or so, that will not be a problem but if you are talking about $5K, 10K, etc then that will affect what type of mortgage you can get. Once you know the violations come back and list them and the estimated cost to cure.    

  • August 15 2010
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Profile picture for sspye
I completely agree!  Thank you for all of your responses!  :)
  • August 15 2010
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I don't know about you SSPYE, but I pick Michael's as the Best Answer!  Way to go Michael.  And Clay, I too am curious about the wording of this city ordinance.  It would be very difficult if such a requirements applied to all properties in the city.

  • August 14 2010
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Thanks Michael, that makes sense, a repair escrow.  
  • August 14 2010
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I have never heard of this, what is the city/state? Maybe it only applies to properties of 5 or more units, large investors. Can you copy and paste the verbage you are referencing?  
  • August 14 2010
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Profile picture for sspye
I'm sorry I wasn't clear.  The city that we are looking to purchase in requires an escrow account for prescribed city violations.  I was wondering how this was done.  Is it done at closing as part of the closing costs?
  • August 14 2010
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Can you clarify your question having to do with an escrow amount?  To my knowledge city certificates or certifications are not required as part of an escrow.  If you are looking at investment properties are you referring to rental certifications or some type of certification from the city that the property can be used for the purpose intended?

  • August 14 2010
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