Home Buying in Ontario>Question Details

Erica, Home Buyer in Ontario, CA

Can we do the lender required repairs before escrow can close?

Asked by Erica, Ontario, CA Tue Jun 3, 2008

I have a situation with the home we are buying, The Lender is requiring us to replace the carpet and paintthe walls prior to the close of escrow. The house is REO, and we already planned on doing this, but will the seller (bank) allow for us to do the repairs prior to close of escrw? We are no asking them to pay, we are paying for it all since it is being purchased as is. What can we do?

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Erica:

It sounds to me like you are getting an FHA loan and the appraiser has raised these issues as health and safety issues in the appraisal. A solution that I have used, and which most lenders will approve, is an escrow holdback for the repairs. What this requires is that you get a bid from a contractor for the work. The lender will then require that you deposit funds into escrow to pay for the work after closing (usually 2X the estimated cost). Then as soon as you own the property, you can have the work done, the FHA appraiser will come back out to inspect that the work has been done and escrow will release the funds in accordance with your lenders written instructions. Remember, until escrow closes and you own the property, you are making repairs to someone elses house. This is usually not something people are willing to do. An escrow holdback is an effective way to resolve this Catch 22 type problem. Speak with your lender and see if they will entertain an escrow holdback as a solution.
1 vote Thank Flag Link Tue Jun 3, 2008
You should first contact the agent that represents the REO property. In many instances the bank will allow minor renovations to facilitate a sale of a property. It stands to reason that if your lender needs certain repairs done to finish a sale of a property, then other lenders will require the same. ie: they won't be able to sell the property to anybody without these repairs. The only hangup with this, is the liability that the bank may have to assume, when they allow workers in the property that are hired by the buyer(non owner). Ask the other agent to have his/her ownn trades people do the work and send the bill to you, or you can pre-pay for all the fixes. Good luck
1 vote Thank Flag Link Tue Jun 3, 2008
Hey Everyone...
In the process of selling my home as with everyone else the "Pest Report" rose into my life yesterday.
One of the things Ive already dealt with was called out but its insignificant compared to the rest. My answer to the pest work was No dont take any funds out of escrow to complete the work. No I am not doing the work myself either.
My home went on the market initially "AS IS" To get it spruced up in two months Ive spent 4,000.
Pool Renovation, Ext Clean up, on and on...
So when this report came up my blood pressure elevated and decided that it wasnt negotiable for me to see another charge on my net sheet. I was of the mind the buyer can say goodbye.
I believe it is refereed to as "Poker Face" a few minutes and they worked it out. But...
The buyers contractor is coming Saturday to do said wrk. I still own the house. Is a "release of liability"
valid in this type of case? Effective My agent said he is licensed, insured bonded. Frankly I only believe what I see like proof. Yes yes yes so she can rush back to the office is what I am assuming....
0 votes Thank Flag Link Wed Jun 19, 2013
We are in a similar situation where we are buying a short sale. The lender is requesting roof repair and mold remediation to be performed prior to close of escrow. We signed a doc indeminifying the seller from any liability from our contractors, workers, etc. Do we as buyers need to sign anything to protect ourselves? I know we are taking a risk by doing all of the repair work prior to close of escrow. I just want to make sure we are somewhat protected during performance of work. We will get licensed contractors with worker's comp.
0 votes Thank Flag Link Tue Aug 28, 2012
To go in there and do the work, you would need a pre possession agreement. Pat is right, if you don't close for some reason, you will loose the money on the repairs. If the house burns down before closing, you are not insured.
Web Reference: http://getprequalified.com
0 votes Thank Flag Link Tue Jun 3, 2008
Hi Erica,
I would agree with the gentleman that previously answered. In addition, another draw back is if you do go ahead with the repairs and then don't get your loan. You've then made the house marketable for someone else. Most REO properties don't allow for repairs due to liability. There are,however, some FHA programs that allow you to buy the property and do the repairs. If you need any help, let me know. I'm in Upland. My cell is 909-286-1301 and my web site is below.
Web Reference: http://www.ffhomes.net
0 votes Thank Flag Link Tue Jun 3, 2008
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