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Some advice needed. After the inspection, we requested that a problem with a bowing basement wall be fixed per a professional's quote of $3,000. The seller agreed to give us a "seller credit" of 3K. What does this mean?
The basics:
$128,500 purchase price
$3,000 in seller assist (already agreed upon in contract)
$1,000 in hand money already in escrow (this, I understand, will go towards closing)
This leaves me with about 4K in closing costs that I am responsible for. I would like to put most of my funds to a hefty down payment. My realtor (being new to real estate) is under the thinking that the seller cannot pay for pre-paid items under the new HUD guidelines. She is getting me a concrete answer tonight, but I figured some wisdom from others would be helpful.
Is this true? The remaining 4K is basically my pre-paids, so can he pay the 3K credit towards these costs?
Okay, if I understand this right, you already have one 3K credit from the seller. You don't say what your loan program is or your down payment, but I'm going to assume it's FHA. On an FHA loan, right now (change expected soon) the seller can pay 6% of your closing costs, including prepaids. So,if the seller increases what they are paying towards closing costs, you should be fine. If it's named for repair money, the sales price will be reduced instead.
Where I am concerned is this: it's highly likely the appraiser will note the bowed wall (and even if not, it's in the contract and the lender is required to send the full contract to the appraiser. (Do not try to hide this, you'll only lose). If the wall is noted by they appraiser, it's also highly likely a structural report will be required. This is for your protection, as well as the lender's. If it is determined the wall is, indeed, a structural problem, they will require repair.
People are doing desparate things due to the new restrictive guidelines. They tend not to like the rules, once they hear them. Again, you don't say what kind of loan this is, I am assuming it's FHA. If all of this is in the contract (credit for bowing basement wall), the lender and appraiser should most definitely require the repair to be done prior to closing.
When you say "the seller can pay 6% of your closing costs," does that mean 6% of the estimated $4,000 in closing costs ($240) or 6% of the sale price ($7,710)?
When you say "the seller can pay 6% of your closing costs," does that mean 6% of the estimated $4,000 in closing costs ($240) or 6% of the sale price ($7,710)?
On the home we recently sold, the buyer did not have an inspection until a week before closing (not sure why). Following the inspection, she requested two repairs by us--a smaller electrical issue and floor tile replacement in one of the bathrooms. We had the electrical fixed within a couple of days, but there was not enough time before scheduled closing to have the floor replaced, and neither of us wanted to delay closing. Instead, we got three estimates for the tile repair and the buyer agreed to have the floor fixed after closing using the mid-estimate. A check for that repair was written to the repair person from our proceeds (or lack thereof, since we had to bring cash to closing). It was listed under "title charges" on the settlement charges, so basically added to closing costs that we paid for buyer.
Sounds like that's what they're doing in your case--adding to the seller's payment of closing costs so that a check will be written directly to the repair person and the wall will be fixed after closing. This prevents the buyer from spending the money on something else.
On the home we recently sold, the buyer did not have an inspection until a week before closing (not sure why). Following the inspection, she requested two repairs by us--a smaller electrical issue and floor tile replacement in one of the bathrooms. We had the electrical fixed within a couple of days, but there was not enough time before scheduled closing to have the floor replaced, and neither of us wanted to delay closing. Instead, we got three estimates for the tile repair and the buyer agreed to have the floor fixed after closing using the mid-estimate. A check for that repair was written to the repair person from our proceeds (or lack thereof, since we had to bring cash to closing). It was listed under "title charges" on the settlement charges, so basically added to closing costs that we paid for buyer.
Sounds like that's what they're doing in your case--adding to the seller's payment of closing costs so that a check will be written directly to the repair person and the wall will be fixed after closing. This prevents the buyer from spending the money on something else.
The only problem is there is no way a structural repair of this nature would ever be allowed to be repaired after closing. The repairs in the home inspection should not be confused with the appraisal. Buyers should never depend on appraisals to take care of their home repair requests. The home inspection is between the buyer and the seller and no one else. If it's in the contract, it's like there is a neon sign pointing to the repairs.
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