Home Buying in Medford>Question Details

Ann, Home Buyer in Medford, NJ

Should we accept repair credit in an escrow account?

Asked by Ann, Medford, NJ Tue Jul 3, 2012

We are buying a house with a 26 yr old roof. After lengthy and painful negotiation with the sellers, they agreed with $4900 credit for roof repairmen. However, the credit has to be hold in an escrow account by our realtor's company. After we obtain a contract for roof repairmen, the money in the escrow will be given to roofer directly. Sellers have refused to put the credit against our closing cost instead. Our loan is a conventional loan. My question is whether putting money in such escrow account a safe way to proceed?
We are contacting an attorney in the mean time as well.
Thank you.

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This question was asked twice, and my lengthy answer was posted on the other one. The issue is not whether the escrow account can be mis-used, which Wayne and Patty have given good advice on, but what the lender will think of this.
1 vote Thank Flag Link Tue Jul 3, 2012
Where is the lengthy answer to how the lender will think of this located? I do not see any reference.
Flag Mon Jun 22, 2015
A lender may or may not have an issue with an escrow for a roof. The issue may be that the seller may not have funds to pay for the roof until after the property closes.
Flag Tue Jul 3, 2012
Escrow accounts are carefullly administered by Attorneys and Real Estate Companies. If they misuse the account, they loose their license. So you should feel confortable with this arrrangement
1 vote Thank Flag Link Tue Jul 3, 2012
It is very common for money to be held in an escrow account if a seller is offering a credit for a specific major repair when purchasing a house. In my area of NJ the attorney typically holds a dollar amount sufficient for the repair and if there is any money left over it is returned to the seller. I think it is a wise move to consult with an attorney so that you feel comfortable with the agreement
0 votes Thank Flag Link Sat Jul 7, 2012
From a lenders point of view, they will want to make sure you will be able to have the roof done, so an escrow account will make them feel better about loaning money on the property. If the concern is simply having the money in escrow as appose to a direct credit to reduce the price, you should consider the fact that you have to have funds in your assets to guarantee the repair in order to secure the lenders' investment in the property. The credit acts like your financing the purchase and repair at the same time. You should actually be more concerned with the $4900 being enough for the complete repair of the roof.
0 votes Thank Flag Link Wed Jul 4, 2012
Dear Ann,

I believe you are in the southern part of the state where the custom is to close without an attorney. As a real estate broker, I cannot give you legal advice. However, if I were the buyer, I would prefer to accept a credit than have money held in escrow. There are many reasons for this. First, when work is done on a property, if the work is not paid for (for whatever reason) a lien can be placed against the property. Second, after the closing, it would be better to get rid of the uncooperative seller than to have to deal with them until the roof issue is satisfied. Third, if there is a dispute with the contractor or the amount the contractor should be paid, you could have additional problems. Attorneys draft special letters regarding the holding of escrow amounts and can detail how the funds will be disbursed. Being an agent from the north, I would not draft or even suggest the wording for an appropriate escrow agreement. I know things may be done differently where you are and I am not saying or implying that southern NJ agents are doing anything wrong or incorrectly. Good luck to you. If you need a referral to an attorney, please contact me at (973) 901-1900 or email me directly at RBruckner31@gmail.com . Good Luck! Robert Bruckner, Coldwell Banker
0 votes Thank Flag Link Tue Jul 3, 2012
Sounds like your agent has already taken care of the problem properly. Check with your lender to make sure they are ok with escrowed funds for the repair. Escrowed funds are fine and better than allowing sellers to fix themselves because you never know if it is repaired properly
0 votes Thank Flag Link Tue Jul 3, 2012
Thank you, Wayne, Patty and Robin. We are checking with our lender now to see whether this could be a potential issue.
0 votes Thank Flag Link Tue Jul 3, 2012
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