Home Buying in Fitchburg>Question Details

Jill, Home Buyer in 01453

I need some advice for creative ways to negotiate repairs. There are several repairs needed and the property needs a new roof NOW as well. Any ideas?

Asked by Jill, 01453 Fri Nov 5, 2010

In Mass. a credit cannot be more than the actual closing costs, which really aren't enough. A roof is a huge cost and with chimney repairs, termite treatment needed, sill repair due to termite damage, and an abandoned oil tank removal, I just don't have enough cash available for all of this. A price reduction won't help. I need cash. I was considering asking the seller to treat for the termites, repair termite damage and possibly credit closing costs or escrow $4-5K towards the roof repairs. I believe an escrow for repairs could cause problems with the appraisal and/or delay closing. What is the best way to get cash for extensive repairs like this without complicating the loan process? No rehab loans please. This home is an estate. I'm trying to be fair about taking on some of the repairs myself. I just can't afford to put on a brand new roof plus this other stuff. My cash is sucked up by the repairs I'm willing to do so there's none left to go towards a roof. Thanks! Jill

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Depending on your loan type (i.e., FHA) an escrow isn't allowed anyway. I suggest asking the seller to complete the repairs prior to closing. Seeing how the repairs are substantial they may want you to put more earnest money down...but that's okay because it will either be used as a credit for your down payment and/or closing costs or be refunded to you at closing. One thing that you should make clear to the Seller is that you are a ready, willing and able buyer that want's to buy there home in a down market while moving into the slow. Good Luck!
1 vote Thank Flag Link Sat Nov 6, 2010
The repairs will need to take place prior to closing so increasing a sales price will not help the seller pay for the repairs, they would get the cash after closing but would need to come up the cash up front. This home has 203K written all over it.
0 votes Thank Flag Link Thu Nov 18, 2010
One option may be to raise your offer price to include the cost of the seller replacing/repairing the roof prior to closing. That way, the seller makes the repair and effectively gets paid via the proceeds at closing. And you have one big headache off your hands. Good luck!
0 votes Thank Flag Link Thu Nov 18, 2010
Some lenders, such as my bank, would not allow escrow holdbacks wit the exception of seasonal weather-related delays to septic or landscaping. In such case a rehab loan, like a 203(k) would be a good choice.

I know that's not what you wanted to hear but it may be worth exploring once again.

0 votes Thank Flag Link Tue Nov 9, 2010
Renovation loans get a bad rap...I have prepared a Total Cost Analysis for a 203K loan rolling in $25,000 in repairs.

Edge Report: http://edge.mortgagecoach.com/report/edgereport.html#13361-0…

Take a look at the report, I think anyone that is strapped for cash that buys a property that needs repairs and chooses to forgo the repairs rather than purchase with a 203K loan is making a huge mistake. The cost of repairs will only escalate as you defer needed maintenance!
0 votes Thank Flag Link Sat Nov 6, 2010

Your perception of the 203K loan is based on a perception that has been a result of inexperienced Loan officers trying to do 203K loans.

FHA Appraisals require that Health and Saftey issues be taken care of as part of the work to be done to the property. I would argue that having the property brought up to minimum standards to be a good thing.

I personally close 203K loans in 30-45 days and amd closing 3-5 203K loans per month. I met Heidi below through a 203K loan that I originated from a client that found me online. I would love an opportunity to discuss the loan program with you and your realtor. I would bet that both of you woudl be shocked at how easyy and painless they can be!
0 votes Thank Flag Link Fri Nov 5, 2010
Thanks everyone. I'm against 203k loans because from what I've read and heard about them they are extremely involved and a pain in the butt. Dealilng with the FHA is a pain. They are so picky and would likely require to fix other things that I may not find an immediate need. I'm just not interested in it.

As for my lender, a small credit union, I was just informed that holdbacks aren't allowed on their loans.

I was just trying to see if there were any other ideas out there. The sellers seem willing to work with me. I think they just want to sell the house. It's been on for 9 months and my home inspection was the first! The roof is the big ticket item. I just might have to ask dear old dad to help me out with the roof :)

Thanks again.
0 votes Thank Flag Link Fri Nov 5, 2010
Your two likely solutions are a 203K loan or to have the seller perform the repairs and to pay for them prior to the sale.

You say you don't want a rehab loan. I'm not sure whether you'd included a 203K in that category or not. But a 203K is really worth considering.

You might be able to pick up some money by having your Realtor lend you part or all of his/her commission. That's the way I handled the purchase of my first house. But, from your description, it doesn't sound like that'd really be enough to help you.

Since it's an estate sale, I'm guessing the current owners (children of the person who'd lived in the home) don't have much interest in sinking a bunch of money into the rehab. (Maybe they do, and maybe they've got the cash to do it. Certainly ask. But often they don't.) They just want to sell the house "as is." If that's the case, they'll be flexible on the price, but--unfortunately--not on what they'll be willing to do.

If that's the way it is, really, you just may have to walk away from the potential purchase.

Hope that helps.
0 votes Thank Flag Link Fri Nov 5, 2010
Don Tepper, Real Estate Pro in Fairfax, VA
Jill I agree with Andrew a 203K with a closing cost credit will get you what you need! Is the oil tank underground or just in the basement. If its just in the basement its not a big expense. Termite treatment is around 1,500 and the roof is the big one, depending on the size. Good Luck go 203K
0 votes Thank Flag Link Fri Nov 5, 2010
What is your agent advising--are the sellers willing to negotiate the repairs--and curious as to why not consider a rehab loan....
0 votes Thank Flag Link Fri Nov 5, 2010

Have you considered an FHA 203K Renovation loan? This program will allow you to put additional funds aside for the renovation. What's the purchase price of the home and how much do you expect the renovations/repairs to cost?
0 votes Thank Flag Link Fri Nov 5, 2010
This question is best suited for your lender. A rehab loan may not be the worst thing. One of my lenders here in GA has an escrow holdback, which the seller is paying for the repairs out of the closing funds. The funds will only be released to a contractor. This is a much cleaner process than the old, "allowances", which we know many lenders did not allow.

But again, talk to a few lenders to see what programs they offer in your area. Hopefully the sellers are motivated and will be willing to work with you.

Good Luck!
Stacy Carter
Associate Broker
Better Homes & Gardens Real Estate Metro Brokers
0 votes Thank Flag Link Fri Nov 5, 2010
Have them repair the roof before settlement. Negotiate that into the contract.

The Federal Government has a fund set up to assist you in the expense to remove inground oil tanks....

Gerry Dunn
Associate Broker
Serving MD, VA and D.C.
0 votes Thank Flag Link Fri Nov 5, 2010
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