Can we use our net profits from escrow to pay for needed repairs? (RE agent, plumber)
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My husband and I are relocating from Southern CA to Phoenix AZ. We are currently living in a house built in 1993 that needs some repairs before we can place it on the market. Right now we are short on money, but our realtor suggested we hire people and pay them out of our net profits from escrow. Is this legal? Will all tradesmen accept such payment?
We need to have our house painted inside and out, front and back yard landscaping redone, flooring replaced, and a badly damaged patio cover (full of wood rot) removed.
How can you guarantee the tradesmen will be paid if for some reason you don't sell?
I have worked with guys who take payment at closing for repairs when the house is under contract, but that means they are more confident of being paid within a couple of weeks.
...painting inside and out, front and back yard landscaping redone,
flooring replaced, and a badly damaged patio cover (full of wood rot) removed.
How much will all this cost and how much more do you expect to get for doing it?
Spending $50,000 to maybe get $60,000 is rarely a wise choice.
Even to maybe get $100,000... can be a tough call.
But doing the work sure makes the marketing easier which is why the RE agents will push for it.
Of note is that all of this work is pretty basic stuff that most new homeowners would
expect or even in many instances plan to do regardless of the current condition.
Maybe not all right off the bat but there are still a lot of buyers who seek a 'handyman special'
or "the worst house in the best neighborhood"
Is it really worth doing more than just the 'clean up' level of work?
In my market, there are many trades that will accept payment at closing. However, the work contracts will state that payment is due within X days, so if the house is not sold, they still get paid.
How much will all this cost and how much more do you expect to get for doing it?
Is it really worth doing more than just the 'clean up' level of work?
In the case of painting.....the paint is fading and peeling on the outside and one room is full of holes on the wall from my husband's dark room that need to be spackled and painted.
Flooring - carpet is badly worn in high traffic areas
Patio Cover - Full of dry rot and leaning slightly
Landscaping - No grass in front or back yard due to CA drought plus have two dead trees
Guesstimating it would cost around $10K to make this house model home ready and have better curb appeal. We can either pay for the costs out of our net profit and still make $160K profit or sell "as is" and make around $125K profit
Guesstimating it would cost around $10K to make this house model home ready...
That sounds low. Probably closer to $20,000
Quote:
We can either pay for the costs out of our net profit and still make $160K profit
or sell "as is" and make around $125K profit (160-125 =35)
So... some number in excess of $10,000 gets spent (on credit)
to maybe gross something less than $35,000? Real world... lets call that $25,000 (maybe $30k).
---
If you have a SOLID contract price which allows for that $160,000 "profit" idea
but which is conditional on doing the work in advance of closing... then, okay.
Just be prepared for a lot of picayune complaints about the work quality...
and likely having to eat doing some over again.
But undertaking the work, add'l debt and risk to do it on spec? Nope.
In the case of painting.....the paint is fading and peeling on the outside and one room is full of holes on the wall from my husband's dark room that need to be spackled and painted.
Flooring - carpet is badly worn in high traffic areas
Patio Cover - Full of dry rot and leaning slightly
Landscaping - No grass in front or back yard due to CA drought plus have two dead trees
Guesstimating it would cost around $10K to make this house model home ready and have better curb appeal. We can either pay for the costs out of our net profit and still make $160K profit or sell "as is" and make around $125K profit
In my area, $10k isn't going to cover the repairs you're looking for - $20k would likely be a stretch & would all need to be paid for in cash to hire done.
You would be much better off focusing on making the house "financing ready" vs "fliptastic" .
Kill the weeds, paint only the rooms that show drywall repairs, knock down the unsafe structure & trees if they're ready to fall down, and get a budget scrape & paint on the exterior. Buy remnants to replace any threadbare carpet. Hire professional cleaners to scrub everything that isn't moving.
You're still looking at $5k if you're lucky & hiring everything done. Raid your 401 or get a "mom loan" to pay for it.
Location: Danbury CT covering all of Fairfield County
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I've had a septic company bill via escrow, because that was a $30,000 system. I didn't get involved with financials between the owner and the contractor. I've a had a plumber get paid at closing to for a few thousand dollar as the seller's weren't around. Other than that, owners need to make arrangements for payment once the work is completed, either via credit cards, personal loans, etc.
My husband and I are relocating from Southern CA to Phoenix AZ. We are currently living in a house built in 1993 that needs some repairs before we can place it on the market. Right now we are short on money, but our realtor suggested we hire people and pay them out of our net profits from escrow. Is this legal? Will all tradesmen accept such payment?
We need to have our house painted inside and out, front and back yard landscaping redone, flooring replaced, and a badly damaged patio cover (full of wood rot) removed.
Thank you in advance for your kind assistance!
Then your Realtor should know professional folks who will do the work now and be happy getting paid later.
I know the tradesmen of mine who will and won't accept such an arrangement, and seldom would it be for > $2K of work.
I'm sure somebody out there is selling a model where they get their regular comepnsation, plus a portion of the increased value you'd get and they front the cost.
For example:
You can sell it now and net $125K after their normal compensation
They front $10K, you sell for $35K more, and they get $20K. You're still at least $15K to the good, with minimal cost risk to you.
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