Many times during a home purchase; the seller is asked to make some repairs as part of a Home Inspection.  Often; there is some negotiating back and forth as to what the seller MUST fix, as per the contract; and what the buyer WANTS to be fixed.

AT some point - all parties agree to the items to be completed before settlement.

Then the day before settlement - or even the the morning before; the buyers and their agent walk through the property and make sure the repairs are complete.  So what happens if they are NOT complete?

Well there are usually two easy remedies.  One - The seller simply credits the buyers with a dollar amount they determine if fair to complete the work.  Two - The Closing attorney takes money for repairs and places into an escrow account until the repairs are complete then pays the bill once the work is complete.

However; changes in the lending world are making these options very difficult.

Lenders HATE the idea of escrowing funds.  They want the transaction CLOSED with no lingering terms or conditions.  Afterall; many lenders will sell these mortgages to someone else; and lingering terms like an escrow account - can hold things up.

So then; we can just ask for a credit right?  Not so fast!  The new disclosure regulations require that the APR that the lender told the buyer in the good faith estimate be no more or less than 1/8 of a percent from the actual APR at settlement.

So whats an 1/8 of a percent on a 200k loan?  $250    OUCH.  Thats not much.

SO if the APR IS off by more than 1/8 of a percent.... the lender must issue a new disclosure and then there is a 3-day waiting period.  Yes - thats right - you are going to have to wait at least 3 days until you can close; depending on how fast the lender and issue the revised good faith estimate.

So how do you get around this potential pitfall?  Easy:

- Make sure all parties are clear on what needs to be fixed and how.

- Provide receipts at least a week (or more) before closing; so any questions or concerns can be resolved.

- Maybe schedule a pre-walk-through 5 or 6 days before settlement.  Of course this may not be possible.  Often sellers are in the midst of packing and moving.  The LAST thing they want is the new buyer coming into the home.

Time will tell how these changes will affect how we do business.  The best idea - FIX IT right the 1st time and document how it was fixed and by whom!

Contact James Downing of the Downing Real Estate Group, if you are selling, buying or have questions!

Office: 202-362-5800   Cell: 703.244.3971

Licensed in Washington DC, Virginia & Maryland.

Coldwell Banker Residential Brokerage - Chevy Chase
5028 Wisconsin Ave NW  Suite 100 * Washington DC 20016