Im curious on why my credits from my seller on says $2500. Now, we’re nervous since we don’t want to do anything that’s illegal or be stuck with a tax bill for the 3k. Hi All, I am in contract to purchase a 2-family property. Trying to get another $6000 will exceed the seller credit limit, which I believe on the program you’re using is 3% of the purchase price. The seller either gives the money to the buyer in a lump sum or it's placed in escrow. But you have to call it a seller credit for closing costs, not a seller credit for repairs. Good luck. They recently submitted a list of requested repairs based off of the home inspection. It is all a negotiation. The money is used to offset some of the buyer's closing costs. A Clever Partner Agent can negotiate seller credits on your behalf. Now their addendum reads, “… credit towards the closing and other pre paid items with all other terms remaining in full force and effect”. My expected closing costs are about $15,000. An addendum for seller credits cannot mention home inspection, remedy for home inspection, repairs, carpet allowance, etc. If there are repairs to be made, they would need to be made prior to settlement. The work would not even be completed until after closing and it would be on the buyers behalf with that check? A credit in this situation would not reduce the loan amount, it’s literally just a cash credit that would be applied to the buyer’s closing costs. Is it unorthodox to ask the seller to provide credit towards a new one even though its still in working condition? If you don’t have the money the only choice I see is to rewrite the contract and say that the $8,000 will be applied towards closing costs, that will reduce their cash needed at closing, and then after closing them having $8,000 more money on hand, they can buy the appliances on their own. The house appraised at the value we are buying it for. I assumed since this is not new construction, they would buy or have appliances and they would get a check at closing. I got a quote for $8400. I’ve sent the addendum to my lender for review before I sign it. And a price reduction doesn’t put cash in your pocket immediately to pay for those repairs. 1. paying a “seller credit” towards your closing costs. Clever’s Concierge Team can help you compare local agents and negotiate better rates. 1. NMLS# 401599© 2020 Capital Bank N.A. I believe in most contracts there is an addendum that is signed that says the home inspection contingency is released by the buyers, meaning they relinquish any right to ask for repairs. The scene opens with a pending sale on a property that needs a repair that the seller has agreed to do. This sounds fishy, and it won’t work. We would like to offer them 5,000 which is under the 4% cap. I still see this come up, there are still agents that say it’s ok. Pinging is currently not allowed. "For Recurring and Non-recurring Closing Costs" If you only asked for the credit to cover VA non-allowed fees, then that’s all it can be used for. Buyer to pay outside of escrow payment from seller to Forever Designs $200,000. Stay safe during these difficult days!! Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. Homebuyers: You can use a seller credit to your advantage. Extend the closing date until the repairs can be completed. It is a “use it or lose it” situation. To find out more about working with a Clever Partner Agent, reach out today. This is because the seller isn't giving the credit out of their own pocket, but rather out their profit on the home sale. If they say all they can afford is $1,750 you can counter offer, and go back and try and get more, and if they say no, then you have to decide if that is acceptable to you. buying with VA mortage home agreed price $470k inpestion shows roof at end of life, oil tank rusty and basement water penetration issues how do we as for either repairs, credit at closing or price reduction since its VA not sure. The money the buyers save at closing can be used for repairs. I would talk to the lender more for explanation surrounding the logic for doing it that way. These are called seller concessions, and they can be a powerful way to save on your closing costs. Some or all of your closing costs, including your property taxes and personal hazard/fire insurance may be paid for by the seller. The home seller doesn't have to agree to give you a seller's credit for repairs, and you might have to decide if you're still willing to buy the house. Why Would A Seller Agree To Give A Credit To Closing Costs? Cash Credit or Repair? Good luck. Thanks Paul! Thank you for this thread. Thanks! What other way can we structure this? We are very upset with this news. A seller credit to the buyer goes towards buyer's costs at closing. Another way is tagging the seller credit on to the final sales price so the buyer has longer to pay off the cost of the repairs. Well, now we are being told that the money can only go towards our $5,000 in closing cost and we miss out of the other $5,000. The basement is finished too and they will not be crediting to put the drywall back up it will be something I have to pay for in the future. Thank you. Thank you. They could ask for a seller's credit to pay for those repairs. If your home inspection came back with a long list of issues, you'll likely ask for a seller's credit for repairs. The seller prepays a contractor to do the work. Occasionally, buyers taking a credit from the seller too close to the day of closing … Good luck. If not, maybe you have a contingency in the contract to void the deal? Is this okay? Your realtor should know how to word that, but you’d just literally ask them to pay the contractor out of their proceeds at closing. Those sound like pretty expensive repairs, I don’t think you’ll be able to get a seller credit for all of it, because my guess is you won’t have closing costs equal to the amount of what it will cost to fix the problems. Total Closing Costs of the closing disclosure. I am afraid there are no other allowable ways. But I don’t know that you’d want to void the deal over a $750 difference. Is there a way to make this happen? This means that you will ultimately pay less at closing time. It is very common for a buyer and seller to negotiate a seller credit in lieu of repairs after a buyer does a home inspection. When you buy a home, you pay fees, called closing costs, to cover the costs of getting the mortgage. There are several ways that a seller's credit can work. Other times, a seller credit is packaged in with a higher sale price, so the money becomes part of the mortgage, allowing buyers more flexibility to pay for repairs. I do not understand the reason for this, since an amount has been established and agreed upon by Seller and myself. Had the addendum been submitted, the buyer would’ve been credited against their closing costs. You can only have a seller credit monies towards closing costs, not appliances or repairs. Or you can ask your lender if a “FHA Limited 203K Loan” would work in this situation. Or is this something I should sign in good faith? You can also ask for a cash credit at closing if you don’t want the seller to make their own repairs. The sellers can’t write you a check for the extra $3,000 outside of closing, that would be a violation of the FHA rules, which require that the seller not give you cash, but only give you credits towards your closing costs. That is 100% a problem for the lender. The VA loan they secured passed, however the buyers wanted me to fix some minor repairs which came to appr. (202) 588-2400 Purchase price total at 170k with 5k seller credit for closing costs. I am buying a house for $378,000 sale price and $10,000 in seller assist. Hello Eleanor. Hello, I had an addendum in my contract of $4000 towards closing cost from the seller. The seller does not want to complete the work prior to closing and we prefer to manage the jobs to get the quality we prefer and have the warranties be with us. If you're using funds that aren't your own the seller is essentially subsidizing the sale. Should I insist on a separate addendum to cover ourselves? The seller has prepaid contractors for the repairs. a seller’s credit)? Your purchase agreement should contain language specifying what the seller credit will be used for, along with an exact dollar amount. Here are three buyer tips for negotiating repairs after a home inspection. I read above that lenders will not allow sellers to cover home repairs at closing unless the lender agrees that the seller can pay a contractor directly with proceeds from the sale. The sellers are on their way out. You just to be very careful and be confident in your selection of the contractors. Seller credits can only go to closing costs not repairs. I understand that it’s technically going to closing costs, but my understanding is that credits like that reduce the total loan amount for the duration of the loan, however this buyer seems to think she was to receive a check from escrow for the repairs. If you are a seller, it is advised that you offer repair money (typically referred to as a ‘credit’) to the buyer instead of handling the repairs yourself. Because of extenuating circumstances, the sellers don’t have enough time to get it done in time for closing. Real Estate is all a negotiation, so it can’t hurt to ask. 2. Would that reduce my cash to close price by $4000? In other words, the seller of the property will give you, the buyer, credit towards potential repairs at closing. Not only is it against the rules, how will a 700k place appraise for 900k? Sellers are paying 3% in closing costs. Post back here again with any questions. And you need to actually have $6,000, or more, of closing costs for that credit to be applied to. Although they agreed to credit me 11k in remedy for basement waterproofing they don’t really want to write a check to me which I understand but the quote I got was just the fastest company I could get out there as most had 2 week wait for estimates. It is a 3% max on srllers assist for closing costs. You have to have enough closing costs to use up the credit. If you're a home buyer and the home inspection revealed problems, your knowledgable realtor can help you decide if a seller's credit is the right option. We will need to show proof they are complete, with either an appraiser’s or licensed contractor’s certification. Buyers who ask for credits just to get the price down may be taking a chance. If a credit is specified to be for a repair either in the contract or addendum, the repairs will have to be completed prior to close of escrow. Agents can't pay it either, nor can lenders. Selling a property for $700k, buyer writes RPA for $900k and request $200k. The seller shouldn't mind because they're not out any extra money -- you're paying them the $10k through the increased sales price, and then they pay that $10k towards the repairs. Note that a seller's credit is rarely used for minor repairs which could be done before closing. Capital Bank N.A.2275 Research Blvd., Suite 600 We have an admenent already and the seller said this is all they can afford even though I have a home inspection and contractor saying it will cost 2,500 dollars to fix. please help! Which is usually why there is a seller credit involved. At the time of the offer, the closing cost credit is always an estimate of what the closing costs will be, and you should always take a credit for slightly less than the amount of the closing costs, because if your credit is too high, it could result in the seller getting more money, or a delay in the closing. The Inspection reported that some roof tiles are loose and broken, water heater needs to be replaced, A/C duct in need of cleaning and sealing it, and some other stuff. Closing costs usually range from 2% to 5% of the home price. Please advise on my best options or what I should do differently. Hi Brian, You go through the process of holding inspections on the home you plan to buy, and as a result of those inspections, agree upon more closing costs credits (maybe in lieu of repairs). Consult with your lender first, but this should be fine. or should I even consider FHA? Also, the floor is slightly slanted in one room bc the house is old & it settled. 1. If you already have a $6000 seller credit towards closing costs, you’re near the limit of what Fannie Mae will allow in seller credits. Unless your closing costs are only $2,500? The seller has no vested interest in the home after it's sold, and he might not hire the most qualified contractor or do the repair in … In one way, the seller pays some of the buyer's closing costs so the buyer has more of their own money to pay for the repairs. An experienced real estate agent will know how to write up the agreement to protect your interests. $700. Or, you can see if the sellers would do the repairs now, and they could pay for them prior to close, or at close, out of the proceeds of the sale? When your buyer’s loan gets into underwriting, they’re going to reject the $8,000 appliance allowance. You may choose to ask the seller to pay for professional repairs, or you might prefer to oversee the work yourself. Thanks for any info you can offer! Can I attach a addendum between the HVAC company and seller only, for the remaining 4800 to be pd after closing? We plan to get a contractor/roofer onsite for estimate.We do not really think price reduction will help us with these repairs. We currently have a contract on our home, the buyers are VA and we have agreed to 3.5% in closing help. But I'm still not clear on where you actually roll the Seller credit into the equation as it's not included in the J. -repairs Hello Craig, some lenders will approve having the contractors directly from proceeds. FHA is not an answer because while they allow more seller credits, you won’t have enough closing costs for the credit to cover. Cash Credit. That would never be allowed under any mortgage lender or any mortgage agency I know of. To get around this, the credit may be in the form of a closing cost credit and there are limits. We don’t do mobile home lending, so I am not sure the same rules apply…but FHA requires a clear termite inspection prior to closing. The support looks good in the crawl space. Their lender may not allow for seller credit and may require the repairs done prior to closing. Check with your loan officer who will check with their underwrite. Well, usually. The seller's net proceeds are reduced by the amount of the credit. Maybe you could do a combination of getting some money credited towards your closing costs, and getting some price reduction, and that will have to be satisfactory. This is very helpful. If the property is moving toward closing, they’re likely packing and dreaming of their life post-sale. He said it definitely is end of life and is surprised the it’s lasted this long. The time of closing costs and new HVAC system dealing with Fannie Mae is... From a seller advice and I agreed repairs and closing costs 700k place appraise for 900k these called... 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