I'm buying a fixer that's been foreclosed. The bank is offering credits towards correcting existing code

Asked by Argie, Los Angeles, CA Fri Jun 27, 2008

violations. Is it better for me get dollars credited in escrow or to lower my purchase price?

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Dot Chance, Agent, Burbank, CA
Fri Jun 27, 2008
BEST ANSWER
The bank may not be willing to make the needed repairs - they usually will not. Your agent needs to talk to the listing agent to get an idea of what the bank will or will not do.

You may be better off with the credit...it really depends upon your personal situation. Do you have the necessary funds to purchase AND do the repairs?

Definitely weigh all your options before you make a decision.
Web Reference:  http://www.DotChance.com
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Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Sat Jun 28, 2008
Argie:

One of the first things I would do is check with MY lender. FHA loans and many conventional loans today require that code violations and health and safety issues be corrected BEFORE you can fund your loan to purchase the property. The question of credits or lower purchase price may be moot if you cannot finance the purchase.

Once that is resolved, it truly depends on your cash position and your way of thinking. A credit will provide you with the cash to make the needed repairs today. If you take a reduced purchase price, figure how long it will take to recoup your out of pocket expenses and if this is attractive to you. (Example: $10,000 credit vs. $10,000 reduction in price. A $10K price reduction will save you about $65 per month P&I at current interest rates and about $10 per month in property taxes. It would take you over 11 years to break even. Does this make sense to you? Or would it be better to take your $10K credit / cash at the close of escrow. I know I would take the credit in this scenario, but each person is different.)

Best of luck to you in your new home purchase, do not hesitate to contact me if you have more questions. I have helped people work through last minute problems in getting their deals done just as a favor, no strings attached. I strongly believe that everyone who wants to own a home should and I work hard to make that a reality. Dare to Dream.

Shel-lee Davis
Real Estate Consultant
RE/MAX Palos Verdes Realty
0 votes
Homa Moaddel, Agent, Foothill Ranch, CA
Sat Jun 28, 2008
Hi Argie,

If the bank lowers your purchase price the amount of your property tax will be lower(depending on how much they lower it) . Before making a final decision bring a few remodeling contractors and get a few estimates of how much it will cost you to repair it on your own and understand how extensive the correction needs to be.

good luck!

Homa
Broker Associate
Prudential California Realty
Mission Viejo
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