Jan 25
So you just negotiated for some repairs on the house you are buying, and we managed to get the Seller to agree to recoat the roof. You can’t wait to move into your new home in 2 weeks.
But hold on - that roofer? He’s booked until next month.
So now what? No one wants to wait a month to close escrow on this thing, and even if you know what an escrow hold-back account is, your lender probably won’t allow it.
Luckily, we can solve this one.
Since the Seller has agreed to pay for the roof, the invoice from the roofing company should be placed into escrow, and escrow will cut a check directly to the roofing company at closing. And then you can hold on to that check for the roofer until they’ve completed the job. Voila!
Couple warnings:
- One - don’t lose the check for the repair company.
- Two - the payment to the repair person should be recorded on the settlement statement. No one is passing money around under the table.
- Three - this may not be advisable for major repairs. You only get the amount of money specified on the invoice. If the repair person finds more damage, or has to do extra work to complete the job, that can raise the price of the repairs. You may have a huge fight on your hands to get any overage incurred paid by the Seller.
January 25th, 2008 at 8:45 pm
Kelley,
In Silicon Valley, we normally hold back 1.5 times the amount for the estimated repair in escrow. Once the repairs are done, the actual cost of the repair is paid directly from escrow to the service provider and the remaining balance of money is released to the seller. We shoot through an addendum indicating this and its done. This way, it protects the buyer from additional costs and allows the homeowner to sell the house on time (and get the “big” money right away).
January 27th, 2008 at 10:36 am
Unless the home is in Douglas. Then it won’t close on time anyway and the roofer may not get across………
Interesting reading! Liked the cactus cups. Never seen that in all my years in AZ.
January 27th, 2008 at 1:10 pm
Hi Dave - we used to do escrow holdbacks, but it’s tough to find any lender that will deal with that anymore. Plus, you incur extra costs of setting up and holding the second escrow account. No one wants to do them around here, so it’s becoming more common just to cut the checks at close.
(shaking head at Yuman.) Hi Pop!
January 27th, 2008 at 1:37 pm
Kelley,
For the most part, our escrow companies will hold the money in the original escrow account for up to one month. After that, they want the money out and gone with all contractors paid.