Selling house, Agreed to credit for termite repairs. Now we've been asked to sign addendum stating credit is for closing costs and waive termite.

Asked by Caslea3383, Poway, CA Wed Jul 31, 2013

All parties agreed and signed stating we the sellers would credit the buyers for termite repairs. Now we are being pressured by our realtor to sign an addendum stating the credit will be for recurring and non recurring closing costs and to waive the termite inspection. Realtor told us we could sign the addendum or pay more money out of pocket for termite clearance (it's about an additional 200.00 not much) This does not feel right. Any thoughts?

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JR Thrasher’s answer
JR Thrasher, Agent, San Diego, CA
Thu Aug 1, 2013
Although this is not uncommon and I support many of the answers below...$200 sounds pretty cheap to cover yourself if you feel uncomfortable. Pay the $200 and sleep soundly at night,.

J.R. Thrasher
1 vote
Claudia Mull…, Mortgage Broker Or Lender, Fremont, CA
Thu Aug 1, 2013
Lenders will not allow for credit for repairs.
By making it a credit for closing costs you ate merely naming your credit something that is acceptable to the lender.
If the lender sees repairs need to be done, they will ask it to be done as it is the lenders collateral and a credit for repairs takes value from the house.
It is done every day all day. It is perfectly legal.
4 votes
Shannon Ande…, Agent, San Diego, CA
Thu Aug 1, 2013
I had the same thing on a deal. The seller agreed to pay was about $2,500. However an addendum was signed for closing costs instead, also waiving termite. Turns out the buyer had a family member who could do the work cheaper, so to satisfy the lender they had to do a waiver and since the seller was already prepared to do the credit, it went for closing costs. I dont know the situation with your deal, but if you the seller were mentally prepared for the credit, what difference does it make how it is "labeled", esprcially if it is saving you $200. If you already agreed to termite clearance on the contract, you have to comply at the higher amount unless your agent put a dollar limit on repairs, or sign the addendum waiving termite to satisfy the lender, and if you already agreed to the credit, why not give closing costs instead? It is saving you a few bucks and as long as the loan funds, everyone is happy. It didnt cost you anymore money than what was already agreed to, and the buyer got the house.
1 vote
Manju Gupta, Agent, Poway, CA
Thu Aug 1, 2013

Without looking at the contract, I agree with Tiffany. It seems that the buyer is looking for free monies in the form of repairs to go towards his/her closing costs. If you really want to close the offer, don.t waive the termite inspection. This is to protect your self. Depending on the size and age of the home, it should not cost more than $200. This is a disclosure.

You may want to bargain on the repairs cost to be credited. Check with your agent. Although it is a sellers' market. but if all costs suit you go ahead with the close.
1 vote
Maria Gilda…, Agent, Manchester, CT
Thu Aug 1, 2013
Hi Caslea,

Try to get the details from your listing agent as to the reason why there was a change in your previous agreement.

If the termite repairs or extermination's cost is around thousand dollars, and the buyers wanted you to give her/him the money instead as credit towards closing costs, my presumption is that the buyers need more funds for the closing.

However, this is just my presumption and you should proceed with caution. Paying $200 for termite clearance well in fact the termites have not been treated does not look right.
1 vote
Rory Firks, Agent, San Diego, CA
Wed Jul 31, 2013
Without seeing the contracts and understanding why the change occurred is difficult to give any advice on this.
It sounds simply that the buyers no longer need the termite clearance (if they are requesting waiving it) but that they still want the credit. Correct? If so, than your agent may not be looking out for your best interest if your being pressured to sign something.
By they way, this is a sellers market- in other words your in control, not the buyer. You can request just about whatever u want and a buyer out there will probably be willing to comply.
I would request that your agent be more specific as to where the money is going. Make sure he specifies to you what recurring closing costs are exactly (taxes, so ur paying a portion of the buyers taxes) and what non-recurring closing costs will be paid as well.
Just ask for more detail about the entire modification to terms that your being asked to sign. Down to the dollar difference.
1 vote
Jill Miranda…, Agent, San Diego, CA
Wed Jul 31, 2013
Have you asked your Realto to explain why and has she done so? What kind of financing are the buyers using? It sounds like the addendum mupight have something to do with their loan. Is this a traditional sale? Without knowing more of the specifics of this transaction it's hard to know what's going on. But without a doubt you should be addressing your concerns with your agent and getting satisfactory answers. If you can't them from her you should contact her broker.

Jill Miranda
Pacific Sotheby's International Realty
CA BRE Lic # 01413799
1 vote
TIFFANY ABBI…, Agent, San Diego, CA
Wed Jul 31, 2013
The reason the agents most likely arranged the credit this way is because if the termite report is included in the purchase contract (which it appears it was) - and it was not countered out in writing from the beginning, then the buyer's lender is going to require that the termite repairs be completed prior to closing. This would entail (what sounds like a fumigation) - which would mean you would have to move out of the house sooner than closing, it would cost you more money, it may delay the closing and frankly, it is more trouble than it's worth.

So the fact that you and the buyer are both waiving the termite report and clearance is actually better for you in that there is no liability associated with the termite work, repairs, etc - and there is nothing that needs to "happen" in order for the transaction to close. The buyers can do the work after closing (or they dont have to) - and it becomes their responsibility. The fact that you are crediting them for "closing costs" - just means they have to bring less money into the transaction to close - and they "should" use that money that they received in lieu of the termite repairs - toward the termite repairs after closing. (So it's a Wash).

Lending guidelines typically do not allow for a credit for repairs (termite or otherwise). This just opens up a can or worms that you dont want opened as a seller (or a buyer). If this transaction were mine, as an agent, I would handle it the same way - and I do - often times. I typically will counter out the termite altogether from the get-go (and provide a termite report to the buyer as a disclosure only) - but since that didn't happen, this is the next best way to make everyone happy. Good luck and congratulations on your sale!
1 vote
Frederick Re…, Agent, SAN DIEGO, CA
Wed Jul 31, 2013

If the Buyer chooses to accept the property without termite clearance and their bank/lender will allow that then it doesn't effect you in any way. If the "credit" amount is the same or less than the termite work required for clearance then it's completely fine.

Frederick Remick
Meridian Capital Real Estate
1 vote
Steven Ornel…, Agent, Fremont, CA
Thu Aug 1, 2013
Hi Caslea3383,

I agree with Claudia's response - this is a very common solution to existing "active damage" issues during a financed sale.

0 votes
Cory La Scala, Agent, San Diego, CA
Thu Aug 1, 2013
This sounds like a lender issue. If you and the buyer agreed to a termite credit, but termite clearance wasn't one of the terms in the contract, that credit makes termite clearance a term of the contract, and then it becomes a condition of the buyer's loan, which must be satisfied before you close. If the lender is letting the buyer waive termite clearance, then you can't credit something that is waived, or it'll have to be done before the buyer's loan is funded right before you close. This is a common scenario, just credit the buyer's closing costs. It's a win-win. This happens with other loan terms and some of the more restrictive loan types also.

Warm Regards,

Cory La Scala, REALTOR
Independence Realty
619-825-6421 Direct
619-884-3452 Cell
Lic # 01443391
0 votes
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