For those working on loans when escrow funds are needed to perform repairs after a closing, then this is a must read from George Souto . There are times it's possible and sometimes other means may be required:
It is not uncommon for a Realtor or a Borrower to ask me if funds can be put into escrow so repairs can be done after the closing. The answer is both a YES and NO answer. So When Can Funds Be Put In Escrow For Repairs?
First of all the only Loan Products I am ware of which allow for funds to be put into escrow for repairs after the loan Closes are Fannie Mae Homepath Loans on Fannie Mae REO Properties, FHA 203K, and FHA Loans on FHA/HUD owned properties. HUD will not make repairs prior to the Closing, and do not allow the Buyer to go into the property to make repairs. So FHA will allow funds to be put into escrow on their foreclosed properties since they will be insurer of the new loan.
All other loans I am aware of ALL repairs have to be completed prior to the Closing EXCEPT if weather does not permit for repairs to be made. Some examples of situations of when funds are allowed to be put into escrow for repairs because of weather conditions are:
- A Roof which needs to be repaired or replace during Winter months in a State where snow is common during the Winter.
- Exterior painting during a time of the year the temperatures are to cold for the paint to dry properly.
- Exterior cement/concrete work during a time of the year the temperatures are to cold for the cement/concrete to cure properly.
There are other examples similar to those above, but these three are the most common ones I see. Under these types of situations the Lender will allow for funds to be put into escrow for repairs. But even under these situations putting funds in an escrow account for repairs to be completed after the Closing is not automatic. A Lender could refuse to escrow for repairs if the area is experiencing an unusually warm Winter, or for other similar reasons.
Even when funds are allowed to be put into escrow for repairs, it is not the ideal thing to do, for example:
- 1 1/2 times the estimated cost of the repair will need to be put into escrow. This could be a burden to the Sellers, especially if those funds are needed to close on another property.
- Repairs may not be done to the Buyers satisfaction, but meet the Lenders requirements.
- Additional problems could be discovered during the repair, and not enough money in escrow to correct them.
- Other damage to the property could occur while waiting for the repairs to be performed.
For these reasons and others, escrowing funds for repairs to be performed after the closing should be avoid unless absolutely necessary.
So When Can Funds Be Put In Escrow For Repairs? They are allowed only when they are specific to the Loan Product, or under very special circumstances like the ones listed above.
Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org