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The third option is to agree on a dollar amount for the repair, and have the seller issue that amount as a credit at the closing, which the buyer can then use to have the repair done. This way, the seller doesn't have to come up with money now, and the buyer can hire the contractor they want to do the work the way they want it done.
That is essentially the same thing as reducing the price to allow for the repair and you have the same problem if the lender wants it done before closing.
That is essentially the same thing as reducing the price to allow for the repair and you have the same problem if the lender wants it done before closing.
It's NOT AT ALL the same thing.
If you reduce the price, the buyers down payment and or monthly payment may be reduced some small amount. The buyer has to find the cash to do the repair. Most buyers do not have $10k laying around immediately after closing on their new house.
If a credit is given at closing, the buyer now has cash to actually get the repair done, and their monthly payments are exactly what they originally budgeted.
If you reduce the price, the buyers down payment and or monthly payment may be reduced some small amount. The buyer has to find the cash to do the repair. Most buyers do not have $10k laying around immediately after closing on their new house.
If a credit is given at closing, the buyer now has cash to actually get the repair done, and their monthly payments are exactly what they originally budgeted.
I understand the concept, but it still requires that you close on a house with a bad roof and not all lenders will agree to let you do it. Not only that, often enough they won't let the seller hand over $500 bucks to repair a sprinkler system let alone $6000 for a roof. A lot depends on what the lender will allow here.
I was also under the impression that the buyer does have the money for the repair, so I don't know why they would wrap it into the loan and pay interest on it.
The lender could agree to have the money remain in escrow for the sole purpose of having the roof issue taken care of through a licensed contractor that has submitted an acceptable quote. The contract for the roof could actually be signed and accepted with the contingency that the escrow closes.
We're under contract to purchase a home and just had our home inspection done.
The inspector says the home needs a new roof right away. There are two pretty small leaks, the asphalt shingles are losing granuales, shingles are unattached and open to wind damage, and there is evidence of impact damage. (probably from a large tree limb). The roof is 15 years old and we are in Central Florida.
Did the failing roof cause any other damages? What is the possibility that there are hidden damages from the failing roof?
I am going to get an official estimate on Monday for full replacement. We do have one phone estimate for $6,000.
My question is how is this normally handled? Would we ask the seller to pay for the entire thing? Would we split the cost 50/50? Would we just reduce the purchase price by $6,000?
You obviously made your bid on the house without knowing the condition of the roof. If your bid was way below the asking price (much lower than the new roof and other repairs are going to cost) then obviously you would absorb the new roof cost to secure the home purchase. If you are bidding high on the home then do you really want to pay near a fair value for a home, based on minimal problems, that has major problems?
I know the seller really needs to sell this home and they are in financial trouble. (the house is empty now) I have no idea if they even have the means to pay some or all of the roof.
That's not your problem or concern! Buying and selling a house is a business deal and there is little room in business these days for emotions.
I'm also unsure if I can even bind homeowner's insurance with a roof that needs immediate replacement, and of course our lender wants to know the name of our carrier pretty soon. You would think insurance companies these days would send someone out to take at least a quick look at the property before they write a policy.
Many insurance companies will write a policy with exclusions until the issues are repaired. They just won't tell you that. If you have any concerns then have your intended Agent send out an adjuster to review the roof so the policy can be obtained.
So what would be my best course of action at this point? We don't want to cancel the contract (and we are well within our inspection period, no worries about running out of time). The seller really needs to sell and we really want to buy, but we want a fair deal.
Renegotiate your offer price to reduce it by the amount of the roof replacement and other issues you want repaired. While you are doi9ng that line up a good roofing company to immediately replace the roof before you move in.
We should get the appraisal data by Wednesday, and I'm also wondering if the appraiser will bring up the situation with the roof. You can tell it's in bad shape just by simple observation, so I would think an appraiser would notice this kind of thing if he is looking.
I also don't want the seller to find her own fly by night roofer and slap something on there for a cut rate price that is going to fall apart on us in 10 years or less.
Never let a seller repair anything as that is what will happen!
Any advice from someone who has been there, and done that? We offered a good price and we did not ask for any closing costs.
Also, what about a "credit" for part of the cost? How does that work when you are getting a mortgage? As I understand it, there might be a limit to that amount and of course, the lender would have concerns if the roof is a wreck.
I'm not super confident in our agent's skills here, and I should also add that the market here is a seller's market. Only about 3 months of inventory. We've been looking for months and have to be out of our rental house on Oct. 31. (or sign another 1 year lease, which we don't want to do) Buying this house will save us hundreds per month over what any rental will cost in this market.
If you are not confident about your Agent's abilities then by all means give them 0% trust to perform their job properly! You should be speaking with their Broker over them about your concerns and best have an Attorney ready if needed!
This roof needs to be replaced asap....IMO The seller needs to pay....either by reducing the price of home, or having it roofed prior to your purchase. Not sure about the legalities, or if FHA loans will work...We had to fix even peeling paint on window ledges for FHA after first inspection, and then it was reinspected. You also want to make sure there is no mold issues where long term water has been leaking down through your house....if it were me, unless the house was your dream house I'd walk....Lots of homes for sale.
Just an update: we cancelled our offer due to a the fact that the appraisal came in very low and we could not agree with the sellers on a new price.
I got a quote for the roof for $5,500. Then we found out the property needs a retro-fit for $2,200 (the tie-downs underneath, because it is a manufactured home). This is only required for financed sales, and most homes in this neighborhood have sold for cash and thus avoided this seller expense.
Then as a final nail in the coffin of this deal, the appraisal came back $20,000 below the contract price! (the market for manufactured homes is very different from stick built homes in my area; the latter is red hot, with only about 3 months of inventory!) The original list was $99,000, then they reduced it to $89,000. We agreed on a $79,000 purchase price. (before we had the inspection that showed the roof was shot, and before I knew about the issue with the retro-fit.)
The appraisal did NOT mention anything about the roof, so I guess it cleared the lender hurdle. (however, if we tried to get a credit back at closing, I thought that might raise a red flag from the lender) My other concern was binding insurance and if the insurance company would flag the roof (you would think so!).
So our final offer to them was we pay the appraised value amount ($60,000) and we would cover the roof cost ($5,500 cost to us, assuming it could wait until after closing) and seller would pay the $2,200 retro-fit cost. (to comply with the new law that FL passed in 1999; this update was required by my lender).
They countered at $65,000 purchase price (wanting us to bring $5,000 cash to the table), plus we cover the roof for $5,500. Well, the lender requires 20% down to finance a manufactured home, so we decided to cancel due to the amount of cash we would have to sink into this place upfront. Plus the annual homeowner's insurance was quoted at $1,000. The building is just going to depreciate (they claimed that they paid $120,000 for the structure back in 1997.
It looks like it all worked out for a reason because we went back out to look this weekend and we are now under contract for a home that we both love at only $137,000. It is a much better deal for the long haul, and it already has a newer roof and a nice fence!
So my advice is to have the wife check out the "fun things" like the kitchen and bathrooms when you are seeing a house, while the husband checks out the roof and other big ticket items so you don't fall in love with a place that needs a big repair. (of course, this is what home inspectors are for, but in the case of roof, many sellers and buyers simply lack the cash to fix that issue these days). I didn't even notice the roof when we looked at the place because I was looking at the inside things.
Just an update: we cancelled our offer due to a the fact that the appraisal came in very low and we could not agree with the sellers on a new price.
I got a quote for the roof for $5,500. Then we found out the property needs a retro-fit for $2,200 (the tie-downs underneath, because it is a manufactured home). This is only required for financed sales, and most homes in this neighborhood have sold for cash and thus avoided this seller expense.
Then as a final nail in the coffin of this deal, the appraisal came back $20,000 below the contract price! (the market for manufactured homes is very different from stick built homes in my area; the latter is red hot, with only about 3 months of inventory!) The original list was $99,000, then they reduced it to $89,000. We agreed on a $79,000 purchase price. (before we had the inspection that showed the roof was shot, and before I knew about the issue with the retro-fit.)
The appraisal did NOT mention anything about the roof, so I guess it cleared the lender hurdle. (however, if we tried to get a credit back at closing, I thought that might raise a red flag from the lender) My other concern was binding insurance and if the insurance company would flag the roof (you would think so!).
So our final offer to them was we pay the appraised value amount ($60,000) and we would cover the roof cost ($5,500 cost to us, assuming it could wait until after closing) and seller would pay the $2,200 retro-fit cost. (to comply with the new law that FL passed in 1999; this update was required by my lender).
They countered at $65,000 purchase price (wanting us to bring $5,000 cash to the table), plus we cover the roof for $5,500. Well, the lender requires 20% down to finance a manufactured home, so we decided to cancel due to the amount of cash we would have to sink into this place upfront. Plus the annual homeowner's insurance was quoted at $1,000. The building is just going to depreciate (they claimed that they paid $120,000 for the structure back in 1997.
It looks like it all worked out for a reason because we went back out to look this weekend and we are now under contract for a home that we both love at only $137,000. It is a much better deal for the long haul, and it already has a newer roof and a nice fence!
So my advice is to have the wife check out the "fun things" like the kitchen and bathrooms when you are seeing a house, while the husband checks out the roof and other big ticket items so you don't fall in love with a place that needs a big repair. (of course, this is what home inspectors are for, but in the case of roof, many sellers and buyers simply lack the cash to fix that issue these days). I didn't even notice the roof when we looked at the place because I was looking at the inside things.
Sound advice
One of the many benefits of having your real estate purchase Inspected. Taking the emotion out of the process. Many clients have thanked me for opening their eyes.
It looks like it all worked out for a reason because we went back out to look this weekend and we are now under contract for a home that we both love at only $137,000. It is a much better deal for the long haul, and it already has a newer roof and a nice fence!
So my advice is to have the wife check out the "fun things" like the kitchen and bathrooms when you are seeing a house, while the husband checks out the roof and other big ticket items so you don't fall in love with a place that needs a big repair. (of course, this is what home inspectors are for, but in the case of roof, many sellers and buyers simply lack the cash to fix that issue these days). I didn't even notice the roof when we looked at the place because I was looking at the inside things.
For a roof and fence, that was a sudden jump in price! But yes, you did the right thing.
Good advice, that last bit, that's what the Wife and I do. They are all big ticket items though!
I sold a house a couple of years ago that was about 23 years old. I thought the roof had been replaced in the last 10 years and the original inspection said it was fine. It developed a small leak in the 4 months I owned it and a couple of roofers said they thought it was original to the house and should be replaced. It went under contract as-is before I could get it done. I told my agent to ask the buyers if they wanted to rewrite the contract with the cost of a new roof in it. They said absolutely. That way, the cost of the roof is in their mortgage and not out of their pocket in a couple of years. Worked for both of us. Probably wouldn't have passed an FHA inspection with the old roof anyway.
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