Septic installation beyond closing date - how can buyers protect themselves from overages/work incompletion?

Asked by, Sun Mar 9, 2014

We are buyers closing on a house in March. Sellers agreed to replace septic, but loam & final seeding won't be started until summer due to weather. How can we protect ourselves financially from added costs or contractor not completing work? Sellers have refused escrow and want to prepay.

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Gail Blanche…, Agent, Buxton, ME
Mon Mar 23, 2015
Prepaying is great unless the contractor goes bankrupt or closes shop before the install date.
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Susan Moore, Agent, Gorham, ME
Mon Mar 10, 2014
The only complete protection is to insist on escrow and not close until you get agreement. Barring that, there are some partial steps you can take. First, make sure you are dealing with an excavation contractor with a good reputation. Second, ask the sellers to pay the majority of the cost prior to closing, but not all. Ask them to hold some back to ensure the spring/summer work is completed. That hold back amount can be delivered to you at closing in a certified check made out to the excavator. (Most lenders will not allow funds to flow from the seller to the buyer, so the check will need to be payable to the third party vendor). Once the work is done, the buyer can deliver the check to the excavation contractor. It's not perfect, but it gives you some control and creates some financial incentive for the excavator to come back in order to get the rest of his money.
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Rick Beal, Agent, Portland, ME
Mon Mar 10, 2014
Why are sellers refusing escrow? Kate is right, what does your buyer agent say? What does your lender say?
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My NC Homes…, Agent, Chapel Hill, NC
Mon Mar 10, 2014
You either need to insist on an escrow and refuse to close without one. (Trust me the sellers are counting the days till closing and are more likely to capitulate than you might imagine) or alternately insist that the Sellers and septic contractor supply you with a written agreement that Sellers are responsible for all costs related to the septic system install and that any overage charges will be the sole responsibility of the Sellers and the contractor will bill them directly. You should have an attorney prepare this for you for the Sellers and Contractor to sign.
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This may work in some states but it would not work in Maine for example. If a contractor is not paid they can place a mechanic's lien on the property regardless of who agreed to pay for the work.
Flag Wed Mar 12, 2014
Richard Yost, Agent, Auburn, ME
Mon Mar 10, 2014
Check the reliability of the installer through references, speak directly to the installer and clarify exactly what is expected ( including timeline), and have a contract spelling it all out exactly. Lastly get a copy of the prepaid invoice. Nothing is going to garanty that the work will be done, but these steps should be the minimum you should do to protect yourself
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Kate Hodgson, Agent, Portland, ME
Sun Mar 9, 2014
Your buyer broker is probably in the best position to help you with that. Is the payment for this work to be placed in escrow?
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