Buying a new house with an agreement to finish a room by RE Agent (real estate, insurance)

[geethal]

I am buying this house in LI. RE agent says they will finish an unfinished room in the 2nd Fl after the closing and willing put it in writing. They said they will spend part of the commission to finish the room. Room is well insulated and just need to put sheetrock and paint. Please let know if this is common in real estate transactions and what should I expect from the listing agent. Any advice will go a long way here.

[franaissance]

They may well need those funds to complete the work but why not just reduce the selling price so you can get it done yourself. Otherwise Include those terms in the contract to buy and state that escrow for that amount should be held until the work is completed.

[flowergarden]

You can set up an escrow to do that, however, I doubt your bank will allow it. I'd check with your bank first before agreeing to this.

[twingles]

Originally Posted by flowergarden

You can set up an escrow to do that, however, I doubt your bank will allow it. I'd check with your bank first before agreeing to this.

Why does the bank need to be involved? The buyer's attorney can hold the money in escrow. You are thinking of the escrow that the taxes and insurance are paid out of, I think - this is something different.

The biggest problem I see with this arrangement is who is choosing who does the work? Is the RE Agent's husband going to give it the old college try on a free weekend, or do you get to pick the contractor? Is there electrical wiring in place? If not, who is going to install that? Are you going to get permits for the work? WHo is going to pay for the permit? And so on. It seems to me the agent is desperate to close this deal and hasn't really given you some important info.

[superfly10]

Who is putting it in writing? The sellers or the REA? That's strange. I wouldn't be comfortable doing that after the closing.

I would ask that it be finished (to code) and available for inspection before closing

Or price of house reduced so you can have it done yourself if the bank will allow it. Get a good estimate... maybe more than one so you can deal with real numbers as you negotiate. (this would be my preferred solution).

If the realtors want to take the amount out of their commission, that's their business. Let them hash it out with the sellers. That's who pays them. You should just concern yourself with the price of your house and the condition it's in at closing. That's it.

After closing... it will be your problem. Any leverage you have is before closing. Any resistance you have to reasonable resolution just gives you an idea of who your dealing with. If it's tough now... it will only be worse once they have your money.

FYI, if it's an FHA loan, you won't get an approved inspection without that room finished.

[Dmdpt]

It depends - some RE professionals are involved in more aspects of the business than just sales. If they are also involved in flips/renovations then they may have a crew already available that they'll send in to do the job.

If it's just a person who also fancies themselves a handyman then you're taking your chances of either shoddy or no work being done.

Find out the specifics. send me a private message if you want - I know people in the business and could find out for you if they are legit.

[Elke Mariotti]

Is this house owned by the RE agent?? That's the only time this would make sense IMHO.
Even then, money should go into escrow till it's taken care of. In my experience, escrow is usually 50% over the estimate provided...

[nyliguy]

I've known agents that were willing to replace doors, fixtures, appliances in order for the buyer to buy at the sellers firm price. An entire room could be a large part of the commision, but in this economy the agent might be willing to let go out some profit to make the sale.

[geethal]

Thank you for all your replies. room has all the wiring and insulation, but just need to put sheetrock and paint. Is there anyway my attorney can hold some money in an escrow even after the closing?

[geethal]

Thank you for all your replies. Room has all the electric wiring, heating and insulation, but just need to put sheetrock and paint. Is there anyway my attorney can hold some money in an escrow even after the closing?