Wayne County - Escrow for Septic Repair (sales, insurance)

[Redbelly]

I'm selling in Wayne County and failed the septic inspection, so I need to have an escrow for that repair at closing. Anyone understand exactly how this works?

Who holds the escrow

Who decides how much it is

Is the sale price effectively reduced?

Thanks in advance.

[Coldjensens]

Originally Posted by Redbelly

1. Who holds the escrow

Who decides how much it is

Is the sale price effectively reduced?

Thanks in advance.

1. Depends on the deal. Typically the title insurance company.

2. Estimates or agreement of the parties.

3. No. Your receipts from the sale are reduced because part of the money goes to repair the system, but the sale price remains the same. You could do some sort of outside escrow where the price is reduced but some of the money gets paid into a separate escrow. I could see this more likely in States where taxes are based entirely on the sales price. Here, I do not see much advantage in creating a fiction like that. You could also reduce the sales price in the amount of the cost of the repair, but I suspect lenders would not like that.

[jaynarie]

As Coldjensens said, title companies typically hold any escrows.
Along with other closing papers, you will sign some sort of escrow agreement. It will state how much money they are holding back and for how long. Title Companies disburse the funds after closing, so they will hold back the agreed upon amount when disbursing. Once repairs are made, any overage will be refunded to you.

[Redbelly]

The title insurance company claims they need to hold back 1.5 times the estimated repair cost. I'm concerned that the extra money will be frittered away (we are talking $35K here). How can I make sure that only the required money is spent?

[jaynarie]

Originally Posted by Redbelly

The title insurance company claims they need to hold back 1.5 times the estimated repair cost. I'm concerned that the extra money will be frittered away (we are talking $35K here). How can I make sure that only the required money is spent?

Who is doing the repairs? Wayne County? A contractor? If a contractor, who chooses the contractor?

The title company will disburse based on the invoice. You will have to communicate with the entity completing the repairs to make sure there are billing correctly.

1.5 times the estimated repair cost is probably typical. I've never dealt with escrows for repairs personally, but I know the industry standard for estimating taxes when the bill is not released is collecting an additional 20%, so an extra 50% for repairs sounds logical.