"Oh! You can just do a repair escrow and make the repairs after closing."
Or, can you??? Sounds easy, but no one promised that real estate transactions would be easy. If they did, they may have misled you. Actually, while real estate transactions do not become easier, our ability to handle them with ease increases year over year with experience. If you've experienced a particular problem in prior a transaction, you're way ahead.
First of all, many loan types do not permit escrows of any type. This is probably a good thing for buyers and sellers because it permits the security and finalty that buyer/owners need. Buying a home with after settlement contingencies introduces risk, primarily to the buyer. The person tasked with making the repairs before or after settlement is the same person who neglected the maintenance in the past.
It's easy to say, "The title company will hold the escrow money until the repair work is completed." However, few title companies are interested in holding these deposits. Sure, they have escrow accounts but the owners of title companies also know that, while escrows are easy, the escrow contingencies are not always easy to release. A seller who has not maintained a property is not the person on whom we can always rely to now make repairs. Further, many title companies are not interested in acting as a repair cost bank.
A Repair Escrow Will Not Cure Delayed Maintenance.
The property has multiple defects, all identified in the buyer's home inspection. Normal procedure is for the buyer to write a Repair Addendum and for the seller to make the repairs prior to settlement. The buyer verfies that the repairs have been made by reviewing the paid receipts of the companies that made the repairs. If the repairs didn't require a licensed company, such as removal of trash and debris, the buyer will verify the cure at the pre-settlement walk-through.
Keep It Simple.
Courtsy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, serving home buyers in Loudoun County, Virginia.
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