Can a Seller Escrow Funds at Settlement for Home Inspection Repairs?

If you are a buyer of a home and want the seller to pay for home inspection repairs, but want to oversee them yourself, you may be asking this question.  The answer is easy if you have an FHA or VA loan.  No!  No escrows for repairs allowed by FHA and VA.  Conventional loans may allow money for repairs to be escrowed, but just about every lender I've ever encountered prefers to see the buyer get the funds as closing cost help and not have it connected to home inspection repairs.

Another solution buyers may propose is to have the seller pay for repairs up front, and have them done later, again so they can supervise.  I don't recommend this approach, particularly since I have lived through the worst possible outcome as a buyer.  The contractor paid to replace a small standing seam roof over a bay window disappeared with the seller's money and NEVER did the repair.  

As a general rule, if a repair is important enough for you as a buyer to want to oversee the work, then take the money as closing cost help and hire the repairman yourself.  

Chris Ann Cleland, Associate Broker- Licensed in Virginia, GRI, SFR, Northern Virginia Short Sale Specialist. Affiliated with Long & Foster, 7526 Limestone Drive, Gainesville, VA 20155.  To contact Chris Ann, call 703-402-0037 or email chrisann@LNF.com.  Or you can visit her website:  www.nvarealestate.net.

Header photos taken by Chris Ann Cleland.

The opinions expressed in this post are those of Chris Ann Cleland, not those of Long & Foster REALTORS®.

 
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11 Comments on Can a Seller Escrow Funds at Settlement for Home Inspection Repairs?

JUN
06
2012
1,252,290 Points 81 Featured Posts Localism Sponsor Attended Rain Camp Called Shot Master

Hi Chris Ann,

I couldn't agree more!! if a repair is important enough for you as a buyer to want to oversee the work, then take the money as closing cost help and hire the repairman yourself. Lenders want to see the credit for closing costs and I have to admit I don't blame them. How many times was a carpet allowance given in the before and the buyers never used it for carpet. House got foreclosed on and the lender was left with a house with no new carpet!
3:37pm • #1
1,143,337 Points 124 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

Chris Ann excellent advice.  Using the funds towards closing costs is the best way to handle this situation, if for whatever reason, the seller in unable to fix the items prior to close.
3:44pm • #2
1,542,924 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Dorie:  When it comes to repairs, if I were a buyer, I'd want the control of doing it myself...or more to the point, hiring the person that does it.

Anna:  Taking the closing credit is a great way to handle it.
4:00pm • #3
1,003,510 Points 117 Featured Posts Outside Blog Attended Rain Camp Called Shot Master

This is very close to the article I recently wrote about escrow holdback.  The lenders don't like 'em.  Sometimes, if the terms on the closing costs are changed AFTER the inspection period, and closing costs are   credited it can raise the redflag to the underwriter.  I've had it happen before.  They want to know why the seller had conceded closing costs in whatever amount and then there's an amendment that increases it two weeks later.  Grrrrrrrrrr . . .
6:48pm • #4
1,542,924 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Carla:  Haven't had that happen yet, but I won't be surprised when it does.
7:29pm • #5
JUN
07
2012
276,190 Points 17 Featured Posts Localism Sponsor Outside Blog Attended Rain Camp Called Shot Master

I have done this several times and everyone was happy.  The buyer gets what they wanted and the seller does not have the hassle of overseeing the repairs.
6:08am • #6
1,542,924 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Kathryn:  It's a win-win.
8:45am • #7
116,740 Points 9 Featured Posts Outside Blog Attended Rain Camp

I couldn't agree more!  Well stated :)
2:43pm • #8
1,542,924 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Marti:  Thanks.
2:59pm • #9
JUN
12
2012
576,267 Points 22 Featured Posts Outside Blog Called Shot Master

Chris Ann~ The same holds true in Colorado.  Sometimes you just have to trust the seller to have the work done and done right.  We always ask to have a professional do the work and we ask for a receipt.
10:44am • #10
1,542,924 Points 116 Featured Posts Localism Sponsor Outside Blog Called Shot Master

Donna:  It's one or the other.  Trust the Seller to do it or do it yourself. 
10:51am • #11


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Chris Ann Cleland, Associate Broker, Northern VA (Long & Foster REALTORS®, Gainesville, VA) Ambassador_large

Chris Ann Cleland, Associate Broker, Northern VA

Bristow, VA

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Long & Foster REALTORS®, Gainesville, VA

Address: 7526 Limestone Drive, Gainesville, VA, 20155

Office Phone: (703) 402-0037

Cell Phone: (703) 402-0037

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