During the purchase or sale of a home you’ll most likely hit some bumps in the road to closing. If you plan to finance your new home, homeowners insurance is required and a clean 4-point inspection (HVAC, electrical, plumbing, and roof) is necessary. So, what can be done if your soon to be new home is in need of a major repair such as roof replacement?
I recently had a seller who suspected that their roof was in need of repair. They gleefully accepted an offer after only 1 day on the market! As suspected, the home inspection showed that a flat portion of the roof was at the end of its life and needed to be replaced. However, the sellers didn’t have the cash to do the repair prior to closing. Whether buying or selling, if you find yourself in circumstances where a repair is needed, you have a couple options that will still allow you to close the deal with little or no money out of pocket.
The most favorable option is to have repairs complete before closing. Some companies will do repairs and allow the payment to be made at closing. Who pays for the repair depends on whether you have an as-is contract or standard residential...but that’s a whole other topic. If the seller is obligated by contract or willing to pay for repairs, payment can come out of their proceeds at closing so that they are not responsible for the full amount up front. As-is contracts do not require a seller to fix the issue but it also gives the buyer the opportunity to back out of the sale and get their deposit back.
Another less desirable option is for the closing agent to hold money for the repairs in an escrow account that will pay for the repair after closing. The escrow account will hold 150% of the estimated cost to repair in the event the repair ends up costing more.
Most inspection reports are going to have a long list of items, don’t be alarmed, many items are not a deal breaker. Buyers and sellers can negotiate repairs even after the property is under contract. Thanks to HGTV, many buyers have become less detoured by a home in need of repairs or updates.
I’m no stranger to a home in need of repairs. See how I financed and gained equity on my own fixer-upper here or join my mailing list for a FREE ebook of your choice (Buying, Selling or Credit Scores 101).