Home Buying in 92620>Question Details

Paulkaudio, Home Buyer in 92620

Wood and Pest Cost Allocation vs Residential Purchase Agreement (Short Sale)

Asked by Paulkaudio, 92620 Wed Apr 27, 2011

Im buying a short sale house. In the Residential Purchase Agreement section of the contract, under Allocation of Costs (4.D.8) , it says that the Seller will pay $100 dollars toward termite repair costs, but in the Wood Destroying Pest Inspection and Allocation of Cost Addendum section, it says the Seller will pay for the Wood Pest Report, and also pay for "Section 1" of the report (evident infestation or infection), while the Buyer only pays for "Section 2" (conditions likely to lead to infestation). After getting a termite inspection, the Termite report stated all repair costs fall under Section 1: evidence of infestation or infection, and repair costs are well over $100. So does mean the seller will have to pay all the costs for this, or only the $100?

Help the community by answering this question:


In a standard sale, it is customary for the seller to pay for section one, and the buyer to pay for section 2. However, in a short sale, the seller is the bank or lender. So those expenses need to be approved by the lender. And sometimes they agree to the costs. If it is a condition of your loan, then that needs to be addressed as well.
0 votes Thank Flag Link Sat Sep 10, 2011
In short sale you need to get a written approval from the bank for any expenses that they are agreeing to pay otherwise all bets are off and the buyer will have to pay for the expenses.

Hope this helps.

David Akram
Realtor, DRE# 01891274
Century 21 All Moves
Contact: http://contactme.davidnewhome.com
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0 votes Thank Flag Link Wed Apr 27, 2011
Hello Paulkaudio,

In a regular transaction the addendum should take precedence, and seller would pay for section 1 if the box that pertains to the Seller is checked.. In a short sale, all depends on lender's final approval. All costs can be negotiated, but they are not always approved by the bank. So, until you get written approval you may not know whether or not the bank would approve these repairs. Also in a short sale, usually the owner does not have money to contribute. Every short sale is different , the end result is what will be negotiated and approved by the lender.
Some times the buyer may have to cover some costs not approved by the lender such as contribution to the second, negotiation fees etc, or termite repairs, or back due HOA fees or all of them combined. If you have an FHA loan the lender may not approve that the buyer pays certain costs.. In a short sale, nothing is final until you have written approval from the lender, as the SSA addendum states ( I hope you have one).
Also for any legal matters in Real Estate, your realtor will be able to give you the answers by calling the CAR legal hotline, if he/she does not have direct access to a real estate attorney.

Good luck.
0 votes Thank Flag Link Wed Apr 27, 2011
I specialize in Short Sales and it would be extremely rare for the bank or homeseller to pay for the termite damages. They obviously alotted $100 to pay for the report so that you know what to expect as far as termite damages on the property. Your Realtor should be explaining to you before you even write the offer that distressed properties are AS-IS, and you better have some major issues and no other interested buyers on the property if you want the bank to pay for any repairs. You dont even want to go there. Remember in a short sale "all terms are subject to the banks approval" and still supercedes any original purchase contract or addendums. Hopefully with the way the agreement is written up it wont effect your financing.
I would also suggest shopping around for a cheaper termite company. You can usually fax or email them a copy of your report and they can give you an estimate based on the other companies findings. I have seen a big difference from one company to another several times. Good luck.
0 votes Thank Flag Link Wed Apr 27, 2011
Hi Paulkaudio, As far as an agent contributing there earned commission to the transaction, FHA or even Conventional loans has restrictions on what anyone can contribute to the transaction, where it be family, friends, or the agent. You may want check with your lender also.. Good luck Ingrid Ski Realtor
0 votes Thank Flag Link Wed Apr 27, 2011
Hello Paulkaudio, Did you ask your agent to have the sellers agent tell the bank that the costs came in x amount higher. They MIGHT negotiate and meet you half way or some variation or do nothing. Now if you cancel then the next person would have the same dilema and would also depend if you are financing FHA, or coinventional or all cash.. The sellers agent may put it back on the market stating no FHA loans and there is termite work for $X amount of money... Your agent should be helping you with this or ask to speak to the broker for additional help... Good luck.. Ingrid Ski Realtor
0 votes Thank Flag Link Wed Apr 27, 2011
The addendum takes precedence (see if section 11 is checked to include the addendum).

So if the costs are well over $100 and the foreclosing lender is not willing to pay or reduce the purchase amount to make up for the costs, you might want to hit up the agents to contribute or pay for these expenses. Legally, at this point, you can walk away from this transaction and get your deposit back assuming you have an addendum that says that the seller will cover section1 because the terms of the purchase contract have changed and therefore, you really have no contract.

I am not a lawyer, but I have been doing short sales before the market crash and I was the first agent who did a short sale in West Irvine.

Good luck to you.

0 votes Thank Flag Link Wed Apr 27, 2011
When you submit your offer to the seller, I am sure that you submit a "Short sale addendum". All terms and conditions are subject to short sale lender's approval. Sometimes, buyer has to pay HOA document fee and HOA transfer fee also.
Good luck.

Michelle Agard/Realtor
DRE# 01272139
0 votes Thank Flag Link Wed Apr 27, 2011
If the repairs are $2,500, than the seller will only pay $100 and you will have to pay the difference of $2,400.
0 votes Thank Flag Link Wed Apr 27, 2011
If it is a short sale most likely the seller (lender) will only pay for $100. It is RARE to have anything more than $100 paid by a seller who has no money or a lender who is taking a big loss. If it's not thousands of dollars and you want the property, pay the cost of the repairs and close on the property.

Thom Colby
Broker / Owner & Certified HAFA Specialist
Thom Colby Properties
Newport Beach, CA
Moving Lives Forward (TM)
We NEVER DOUBLE-END Transactions in our Brokerage. IN MY OPINION, there is NO benefit to the Seller or Buyer and only benefits the Agent. Also, NEVER use your RE Agent / Broker as your Lender or vice versa. Also, be careful when using Real Estate Broker-owned Escrow and Title Companies - they can be loads of trouble.
888-391-5245 Direct Cell
DRE# 01398570
0 votes Thank Flag Link Wed Apr 27, 2011
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