At least that way you would not be leaving $5,000 on the table of a $10,000 seller credit where half of it was not usable. The seller is motivated & I have reason to believe they will agree to pay for the new roof once they get the money from closing.. I’m slightly confused after reading the previous questions…So if they can only cover my closing costs in contract & the goal is not to disclose roof issues to the lender, how would they be able to pay the roofers directly? FHA loan. Here’s an example… let’s say you were able to negotiate a large seller credit to cover a good majority of your closing costs with your offer. The credit shall be for the amount of _____ and be used as a credit towards ( ) Closing Costs ( ) Repairs. Brian, great article! That is 100% a problem for the lender. It seems like a far better idea for the buyer to handle all repairs using a credit from the seller, right? The same logic applies to furniture or items that a buyer and seller negotiate and agree to have the seller leave behind, like a chandelier, pool table, or patio furniture. I also have 10k in other repairs outside of this. The sellers can’t write you a check for the extra $3,000 outside of closing, that would be a violation of the FHA rules, which require that the seller not give you cash, but only give you credits towards your closing costs. We are looking to close by June 21st. “Seller prefer not to do any repairs” Now, 170k is my absolute max, max,max, and a seller credit is already included for closing.. Any strategy toward making our offer better and dealing with the pest work. Rather than have this even be an issue, it is probably better to write this into a separate addendum that no one else ever sees except for the buyer and seller. Is that ok? Click here for the Capital Bank, N.A. You cannot have a seller credit for: -carpet allowance The sellers are wanting to write a direct check to the company on the estimate I wouldn’t not mind but I just feel that I should’ve gotten more quotes. Now after reading your article, this presents as problematic. Or wood floors that become damaged when a water pipe breaks just before closing day. I assumed since this is not new construction, they would buy or have appliances and they would get a check at closing. After all, the buyer is far more invested in the work being done properly and appropriately. They could ask for a seller's credit to pay for those repairs. Or you can ask your lender if a “FHA Limited 203K Loan” would work in this situation. You’ll have to check with your lender, I do not know of any lenders that allow escrow accounts for repairs. There is no limit to how much a veteran can receive in concessions towards what is considered customary; however, there is a 4% of the sales price limit on things that are considered outside of what is customary. I think what they’re setting up for you is an escrow for repairs, not a seller credit. And make sure that they don’t write the addendum stating that the closing cost credit is in lieu of the repairs, they should just write that they’re giving you the seller credit, period. This entry was posted Although every situation is different, more often than not neither the Buyer nor the Seller wants to extend the closing … You can follow any responses to this entry through the RSS 2.0 feed. The lender can know about a repair if it’s not one that an appraiser alerts them to being structural. You might have to give the money back to the seller or see if you could use it to purchase points from your lender. I did not think to ask them to sign off on a second addendum that would say that the home inspections contingency was released. Or is this something I should sign in good faith? I have a closing in less than 3 weeks. This is completely different then a seller credit. thanks. For example, if they have now agreed to give you a total of $12,000, but your closing costs are $10,000; you’d lose that last $2,000. It needs to say, ““seller agrees to provide a $6,000 credit towards buyers closing costs”. or should I even consider FHA? To get around this, the credit may be in the form of a closing cost credit and there are limits. It could be hail damage to a roof that happens a couple of days before closing. I really appreciate it! After the inspection, there is a $10,000 repair needed. The VA loan they secured passed, however the buyers wanted me to fix some minor repairs which came to appr. Is a reduction in price of the home in lieu of repairs similar to what you are explaining in your article (i.e. After sending you my question earlier I followed up with my realtor to try an obtain an email from the buyers assuring us that they were fully aware that the credit towards the closing was in lieu of the credit for the repairs previously agreed to. Note that a seller's credit is rarely used for minor repairs which could be done before closing. However, the repairs cannot be completed before the closing. Thank you for your help! If it shows a $4,000 credit from the seller, then that is what you should get. Although they agreed to credit me 11k in remedy for basement waterproofing they don’t really want to write a check to me which I understand but the quote I got was just the fastest company I could get out there as most had 2 week wait for estimates. Another way is tagging the seller credit on to the final sales price so the buyer has longer to pay off the cost of the repairs. If not, ask your realtor if that exists in your area, or if not, if a separate addendum can be created to address this. My agent insist that I have contractors give estimates before closing. Why, after all, should you pay for the closing costs? 1. We can’t afford to pay for this roof ourselves at this point. Extend the closing date until the repairs can be completed. Brian Martucci – NMLS# 185421. Here are three buyer tips for negotiating repairs after a home inspection. Home improvements or repairs are needed & the home buyer needs to maximize post-closing liquidity in order to complete these projects. the only way Fannie Mae or an underwriter will allow a seller to credit you money is: This sounds fishy, and it won’t work. But I’ve also seen it done, so it’s not an outrageous request. I’d ask your current lender for clarification. We started asking some questions about it, such as is it legal, and is it taxable, and both the title company and our agent are being vague about. And how do you think it should be worded. So how do you get the seller to pay for repairs that you negotiate to be compensated for? Should I insist on a separate addendum to cover ourselves? I would talk to the lender more for explanation surrounding the logic for doing it that way. Here are the rules and requirements in short, quick form. But I'm still not clear on where you actually roll the Seller credit into the equation as it's not included in the J. Stay safe during these difficult days!! So if you are short on costs, ask them to buydown the interest rate by paying discount points, to increase your costs to use up the full $12,000. Is is right to write an addendum asking for repairs before closing and asking to sellers’ give credit toward buyers’ closing cost? I have a buyer who asked for a 8000 appliance allowance and I agreed. The repairs will not get done til after closing. Good luck. Buying a house is a series of negotiations — everything from the final selling price to home repairs and closing costs. The buyer may just ask that the seller have those repairs done or ask for a price reduction. This is very helpful. That would be a reason you are only getting $2500, because the $4000 can only be applied to actual closing costs, it can’t be part of a cash credit. We currently have a contract on our home, the buyers are VA and we have agreed to 3.5% in closing help. You can only have a seller credit monies towards closing costs, not appliances or repairs. The seller has no vested interest in the home after it's sold, and he might not hire the most qualified contractor or do the repair in … Hello Warren. Hello Tyler. The seller has provided a lump sum to cover repair costs. Great article Brian. Selling a property for $700k, buyer writes RPA for $900k and request $200k. Provide a credit to the Buyer at closing for the amount of the repairs. Or, if the sellers don’t want to give you the extra $3,000 towards your closing costs, they can simply do the repairs prior to closing. Halfway through the closing process. Post back here again with any questions. There is an addendum presented to me that will allow me to select the contractors after settlement and the settlement agent will hold funds for dispersement when work is completed. In other words, the seller of the property will give you, the buyer, credit towards potential repairs at closing. Please advise on my best options or what I should do differently. Is there a way to make this happen? Keeping in mind that dealing with Fannie Mae REO is like pulling teeth when it comes to their contacts. Occasionally, buyers taking a credit from the seller too close to the day of closing … These would be things like Home Depot gift cards, discount points the on VA Funding Fee, and the payoff of debt, collections, and judgments to help the veteran qualify. Hello I am buying a home and the seller is only giving me a 1,750 credit towards my Closeout cost but the repairs for the windows is at 2,500. A Clever Partner Agent can negotiate seller credits on your behalf. Which is usually why there is a seller credit involved. Credits for closing costs cannot exceed actual closing costs. The house is perfect, however there may need to be some repairs under 5k, to apparently get FHA to close. But you have to call it a seller credit for closing costs, not a seller credit for repairs. Buyers who ask for credits just to get the price down may be taking a chance. Hi Brian, -repairs A portion of the seller's proceeds can be held in trust after closing and used to pay for repairs. NMLS# 401599© 2020 Capital Bank N.A. Hello Ana. Your realtor really should have known that. Good luck working it out. The sellers are on their way out. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. At least you’ll not leave any $$ on the table. In one way, the seller pays some of the buyer's closing costs so the buyer has more of their own money to pay for the repairs. 1. The rule makers expect a house to be 100% complete at the time of closing. Good luck. Pinging is currently not allowed. The cost of the repairs is $10k. You go through the process of holding inspections on the home you plan to buy, and as a result of those inspections, agree upon more closing costs credits (maybe in lieu of repairs). Is this okay? ONLY CLOSING COSTS can be paid for by seller credits, but I find many Realtors do not know this, or forget this, and they write into the contract or an addendum that, “the seller agrees to pay $_____ to compensate the buyers for termite damage.” Loan denied, or at least put on hold, until the leaky roof is fixed. I would talk to the lender, but if you’ve already met the limit of what the seller can pay towards the buyers closing cost the only other solution would be to actually make the repairs prior to closing. It’s easier for the seller to figure out how much they’ll really make when you request $5,000 credit on a $250,000 purchase, versus asking for 2% credit. But my realtor appears to see no issues with it. A seller can’t give you the difference in cash. Agents can't pay it either, nor can lenders. The seller may agree to meet the buyer’s demands, but making repairs to a home fixture, such as a roof, isn’t convenient while a person still occupies a home. Now their addendum reads, “… credit towards the closing and other pre paid items with all other terms remaining in full force and effect”. Hi. FHA is not an answer because while they allow more seller credits, you won’t have enough closing costs for the credit to cover. Through my due diligence I discovered repairs needed and have agreed upon a credit from Seller in the amount of $25,000. Great article. I read above that lenders will not allow sellers to cover home repairs at closing unless the lender agrees that the seller can pay a contractor directly with proceeds from the sale. They have now requested I buy the appliances because they have to be ordered and they would like them installed before closing. These are called seller concessions, and they can be a powerful way to save on your closing costs. repairs that you negotiate to be compensated for, ONLY CLOSING COSTS can be paid for by seller credits, Qualifying For A Mortgage With Rental Income. That’s not allowed. 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