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We are selling our home in Wyoming...it is most definitely a buyer's market.
After taking less than what we were asking and agreeing to $15,500 in repairs in order for her to qualify for an FHA loan, our realtor had us sign a contract which forces us to use her contractors. We had found contractors to do the same work for about 11.500--but finally agreed to the $15,500 because, let's face it, the chances of finding another buyer, especially in the winter in Wyoming, are slim and none.
However, the roofer she wants to contract wants $12,500, leaving the rest of the work the FHA requires, to be done for under $2,500--not going to happen.
So what happens if they begin all of this work and then her loan falls through because she can't have all of the required work done (or for some other reason)? Are we legally responsible because she chose the highest bidding contractors even though the other contractors are perfectly respectable? If this work is begun and her funding falls apart, we'll have to file bankruptcy. We can't come up with $15,500 right now. We've moved to California and all of our money is tied up in that house.
What are our rights here? I realize that we should have read closer--the stipulation that she chooses the contractors would have definitely been out!
Our realtor is a bit green, hers is a shark. I think our realtor is out of his league.
Have your buyer qualify for an FHA 203k loan. The 203k version of FHA is a rehab loan that will allow someone to finance improvements/repairs, including those to bring the property up to HUD's minimum property requirements. The 203k version of FHA may add 2-4 weeks to the process, so you would pay some extra interest, but not nearly to the tune of $15,500.
I am sure that when the only legitimate offer requires repairs so the "buyer" can get the place financed under FHA things must be really really bad.
I would have structured the deal quite a bit differently, so that if the "buyer" backed out you would have had SIGNFICANT safeguards -- the earnest money agreement would have been an obvious point to put in the deal, as well as having much tighter control of how repairs would be done / contractors selected.
If you have not already consulted with the agent's managing broker and a qualified real estate attorney PLEASE DO THIS TOMMORROW!
If you literally have no funds to pay for the repairs YOU HAVE NO BUSINESS AGREEING TO HIRE ANY CONTRACTOR. Worst case the deal falls apart, the contractor(s) put mechanics liens on the house, the lender sues you -- your lossesmcould be extreme..
Heck, even best case, just how "high end" a house are you selling -- on the one hand if it big enough to need $11,500 worth or ROOFING it probably is not tiny, but on the other hand, "high end" buyers don't often insist on using FHA loan -- they generally have enough downpayment tonuse congenital financing and if the place is rough that negotiate the price down to where they can do repairs on their own terms.
DO NOT blow this off and let the contractor(s) start on a job you can't afford to pay for.
This is definitely a question for your agent's broker, and a real estate attorney.
I know San Diego very well, and high priced real estate is not uncommon out there.
If you are not just using hyperbole about $50,000 allowance the deal COULD have been structured so that the commissions were part of the deal too, but I suspect you know the agent and broker are not making anywhere near that...
You really need attorney assistance on this one. We'd love to help you here, but this is a contract issue and someone needs to read your contract and offer you suggestions.
A. The house is in Wyoming--not San Diego.
B. The house doesn't require $12,500 worth of roofing. We received a perfectly acceptable $7,000 bid (for winter install). The buyer's contractor offered a bid of $12,500 and that's who she wants to use.
C. We (my overly impulsive fiance and I) paid cash for this house 3 years ago. It needed some work, but he decided to fly off to England to reunite with an old flame instead, leaving me a year shy of my undergrad degree with a part-time job, so the roof wasn't fixed, the garage wasn't sided, the gutters weren't fixed--this is the work the FHA iinspector wants done. By the time he came crawling back, he'd spent too much money to make these repairs outright.
D. I got other bids and it could all be done for less than what the buyer wants to spend on the roof.
I'm afraid that our naivete and my realtor's inexperience has really gotten us into a bind.
We are selling our home in Wyoming...it is most definitely a buyer's market.
After taking less than what we were asking and agreeing to $15,500 in repairs in order for her to qualify for an FHA loan,
Quote:
our realtor had us sign a contract
which forces us to use her contractors. We had found contractors to do the same work for about 11.500--but finally agreed to the $15,500 because, let's face it, the chances of finding another buyer, especially in the winter in Wyoming, are slim and none.
However, the roofer she wants to contract wants $12,500, leaving the rest of the work the FHA requires, to be done for under $2,500--not going to happen.
So what happens if they begin all of this work and then her loan falls through because she can't have all of the required work done (or for some other reason)? Are we legally responsible because she chose the highest bidding contractors even though the other contractors are perfectly respectable? If this work is begun and her funding falls apart, we'll have to file bankruptcy. We can't come up with $15,500 right now. We've moved to California and all of our money is tied up in that house.
What are our rights here? I realize that we should have read closer--the stipulation that she chooses the contractors would have definitely been out!
Our realtor is a bit green, hers is a shark. I think our realtor is out of his league.
Any help would be appreciated.
Seems like you signed the contract prematurely; and your agent should have suggested you get legal advice, or at the very least advice from her broker in charge. That being said, we have the cart before the horse now, and you need legal advice from a Wyoming attorney. "Shane the MortgageMan" is correct, the buyer needs to qualify for a loan to cover repairs, that would be the only way your contract would fail is if the buyers are denied the loan. (I recently closed on an FHA buyer's loan on a property I owned in another state, and held my breath throughout.) Buyer was only putting down 5% on a huge loan. FHA loans can take a bit longer than conventional loans for approval, you may have time to get some qualified legal advice. Evidently you don't have any contingencies in the contract to protect you? Is the loan in review by the FHA yet? They are very picky about repairs to a property. You need protection. Keep us posted pls.
Last edited by QuilterChick; 01-05-2011 at 07:36 AM..
Reason: corrected spelling
As the others said consult with the attorney/broker for wording bud I'd try to negotiate the other contractors down or ask the buyer to pay the difference by adding it into the sales price. I'd also want additional earnest money that is non refundable if the buyer fails to close.
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Ouch...
