Escrow Holdback - Now To Include in Original Purchase and Sale Agreement

Jo- I agree that agents need to explain what needs to be done better than many do. However, the fact is, that even though the seller signs a contract here in Florida with a buyer, the seller may have agreed to do a repair specified in the contract but they don't HAVE to do anything. Their choice is that they no one is going to force them to do a repair if they renig on that repair. Our contracts state that if the seller does not do the repairs they agreed to do that the money that those repairs would cost must be escrowed. The title company will pay the repair orders upon completion and then the seller will get a check back of what is left. But even then, the seller has to agree at closing to do this. They can say no, no matter what they signed. And they can get sued for that. But saying they have to do something is just not the case. They can choose not to do it although there are usually consequences. I have paid for things myself when the deal was about to fall apart over a stupid $50 repair! I paid the 50 bucks just to get it closed and for no one to get sued, etc. It is not right, but it happens.

And often the listing agent can not make the seller do the right thing. Just because we have the listing does not mean we can boss the seller around or tell them what to do.

Will be interested to see you follow up post on how this goes as you start using this statement.

It's very frustrating to see the way our contracts are handled.  At times no weight is given to the legal document the sellers (or buyers) signed.  At least here, the only remedy a seller or buyer has over a non-performing party is through ligation... and it's been my experience the one being the horses... behind... knows the other party won't take them to court over a simple repair.  It's a game of chicken to some of these clowns... and they're betting the other guy will flinch first.  That, my friend, is a sad, sad commentary I know.

Jo...

And at least you will be featured in the Group:

"Whining Wednesdays!"

BTW I would think that sellers would be concerned about a buyer walking.

Jo - I think the only way it is going to stop is for a buyer to be willing to walk. But, keep us posted on how well the new escrow clause works.

Good luck with the escrow holdback!!! A great idea that would be SOOO good if it was allowed by the lenders.  Your buyers lender will not allow an escrow in probably 95% of the deals. New construction is the only scenario that a holdback has been allowed on any of my deals this year.

It is a difficult dilemma, I always try to get the buyer to accept minor repairs as part of the overall offer. Once the buyer says, I'll take it as is, then I suggest to give it a try and ask the seller to fix it! And see what happens. On the one hand if the seller says no. Then the buyer will be O. K. with it and the issue will be settled. If the seller does agree to fix it then it will be a bonus. I start with the worst case scenario for my buyer client. If he is fine with it, from there on everything we get will make things better for everybody. Good discussion, thank you Jo for bringing that up.

Antonio

I haven't seen any allowed escrow holdbacks here in Northern IL in years. 

We have had problems with vandalism to REO homes during escrow and the banks not wanting to fix them.  There is one REO agent around here who thinks she does not need to put in smoke detectors or strap the water heater, because it is an "As Is" sale.  In California the Seller is required to do those things - no exceptions.

Yes, smoke detector and water heater bracing still have to be done, and there are sooo many agents that dont do it! The bank is still responsible for having someone go out and do it.

Good luck with this Jo, So much of what we do is directly related to how honorable the people (both buyer and seller) are.  We are working for one or the other and have to represent them fairly and honestly.  Also, every state works a little differently, with different contracts and legal verbiage.  Will be interested to see how this plays out for you. 

Some agents let the sellers believe that if it doesn't get done the buyers will just get some money at closing. If I was a buyer I would want it completed before the closing just like the contract stated. Why take the hassle back on yourself when the seller said they would do it. We have a hold back for possession only, completion would be a new one that would probably work.

I think a great agent will have prepared his client for that.  I do a "Honey DO" walk on every listing and give them a list of things that a buyer is likely to ask for to be repaired and a list of things to do that will make the home more appealing.  At least if my client won;t do the repair, I can pull out the Honey DO list and/or the inspection repair addendum and wave it at the buyer agent.

I always advise buyers to specify funds be allocated for repairs, rather than asking the sellers to do them. For one thing, the sellers may do a cheap job, or use inexperienced repair people. Whatever amount is agreed to, the Inspection Notice is signed by both parties by the deadline, then it's part of the contract and the closer handles it.  It's on the HUD and there's no additional signing of documents at closing.

If it's a substantial breach I could see suing the seller.  If the loan lock expires and the new interest rate is much higher I would consider, at the very least, getting the seller to pay the discount points or reduce the sale price by that amount.

Smaller items, like a window or two, I would probably let go, but it's always up to the client.