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Rena | Buying a house and earnest money question? |
My co-worker just told me that tomorrow she is suppose to close at 10 am but had a walk through today and there were four things not fixed yet that the current owner of the house was suppose to fix. She paid 4k in earnest money for the house and the current owner had 8 weeks to get this done. She was told she has three options. 1) delay closing 2) have her pay something like $200.00 for the rest of the repairs at closing or 3) after closing pay for someone to fix the problems and send her the bill
Option 1 isn't a good option because my co-worker lives in an apartment and the lease is up at the end of October. She doesn't want to risk that the current owner wont fix the problems and delay the closing further. Option 2 is risky because what if the problems cost more than the agreed amount paid? and option 3 maybe an option however isn't there a chance that the current owner doesn't pay the bill and my co-worker is stuck with it still?
Can anyone offer any advice on what my co-worker should do? Is there any way she can get her earnest money back?
Also we live in Texas
Thanks! |
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golferwhoworks
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delay closing is best option now. Other than this have the realtors force a $2000 escrow that the seller will not get if not repaired by your move in date. If not done then the seller forfeits the cash back to you |
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Spock (rhp)
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if the seller is going to get anything out of the house at all, what the buyer's attorney does is require that 1,000 be put into an escrow account to cover the repairs not yet completed. |
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I Buy And Sell Houses
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First question: How firm is the repair bid? If there's a firm repair bid for $200, then escrow an amount double that, or $400.
If the repair bid is more of a guesstimate, then escrow more. Your co-worker should talk with her real estate agent to determine how firm those numbers are and what multiple above the estimates should be escrowed.
Don't delay closing. The costs of doing so will be far greater. And, with today's economic crisis, her funding may dry up. She should close as scheudled.
And don't go with option (3). Once someone has sold a property, there's little incentive to pay a bill.
So, escrow an amount that will comfortably cover the needed repairs, plus some extra for a safety margin. Then your co-worker buys the property, has the work done (to her standards), and the repairs are paid out of the escrow.
That's the way it should be done. Have your co-worker consult with her Realtor for the details.
Hope that helps. |
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DeeDee
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Definitely put money in escrow and close. The amount put in escrow should be substantial, such as $1,000.00 to $2,000.00, because this will prompt the Seller to honor the contract in order to get the balance of the sale proceeds. |
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Judy1
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Requesting that the money be put in escrow is a good idea if she can make it happen. But frankly, if she can't and if she expects the 4 items to total around $200, I'd just let it go rather than delay closing for that - if she can't get some extra money out of them for it, probably not worth the aggravation of possibly losing the house. |
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MoneyMatters101.com
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Of all the 3 scenarios mentioned, if your co-worker is really concerned about the repairs, it would probably be a good idea to delay the closing, especially if the repairs are major.
Some lenders frown on having money left if escrow for repairs because, like you said, what happens if that money is not enough to cover the costs. If the lender will allow money to be left in escrow for repair work, and your co-worker agrees, she should have at least 2 to contractors give estimates and then ask the seller to leave at least 25 to 50% above the acceptable estimate, with the stipulation, written in the escrow, that those funds will be returned to the seller when the work is completed and the contractor submits his final bill to escrow.
The reason for asking the seller to leave more than what the contractor estimates is because of unforeseen problems that might arise when the contractor starts the repair job.
Since the seller has had ample opportunity to complete the repairs, and has not, your co-worker should be cautious in letting the escrow close before all repairs are completed, or at least make sure that there is enough money left to cover them.
Once an escrow closes, and the seller vacates the property, it may be difficult to get the seller to live up to his part of the agreement and the only recourse may be legal, which may end up costing more than what the repairs will be. |
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lonnie w
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Her atty should help her with this. Just take the 200 and be done with it. The seller wont agree to put 1000 in an escrow account. It will delay the closing. |
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kelly
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Have your co-worker contact a repair person asap and get estimates on the things that are left to be done, are these items major or minor things and then once you have the estimate then ask for this amount to be removed from the asking price or ask the seller of the home to get a cashier check from the bank in this amount for the repairs that were left undone, with a bank cashier check then you do not have to worry about the personal check bouncing. Good luck. |
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Sharon T
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Have $1000 held in escrow until the repairs are completed to your satisfaction. Then the money will be given to the seller. If that isn't a high enough number, raise it to your comfort level.
She should ask her attorney if she can cancel the sale, if that is what she wants to do. If she hasn't hired an attorney, well.... |
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