The crazy cold, wet spring weather we had this season can put a damper on exterior repairs that need to be finished before closing!
But what happens when repairs per the Sales Contract can’t be completed in time for closing?
There are three ways to address this issue:
- Set up an escrow for repairs.
- Provide a credit to the Buyer at closing for the amount of the repairs.
- Extend the closing date until the repairs can be completed.
Although every situation is different, more often than not neither the Buyer nor the Seller wants to extend the closing date. So, that leaves options #1 or #2. If the Buyer is financing their home purchase you must first do a little homework before knowing how to handle this situation.
Investors Title Company Tips for Closing With Incomplete Repairs
As the best title company in St. Louis, we make it our responsibility to help you have the smoothest closing possible. Although closing with incomplete repairs is not the ideal situation for any party, knowing how to handle it can help resolve the situation without stress or hassle.
Every Lender has different requirements when it comes to setting up an escrow at closing, and some Lenders won’t allow an escrow at all. The same holds true for a credit for repairs to the Buyer. Some loan requirements won’t allow a repair credit to the Buyer, or a credit could affect the terms of the Buyer’s loan. That is why you must always get Lender approval FIRST, before suggesting either an escrow or a credit to your client to remedy the situation.
If it is determined that setting up an escrow is the best solution, Investors Title Company must have a written proposal for the work to be completed and will require an escrow amount of one and one-half times the amount of the proposal. Our legal department will prepare the escrow agreement that must be signed by the Buyer and the Seller at closing.
After the work has been completed, and before ITC will release the funds from escrow, we require a letter from the Buyer stating that the work has been completed to their satisfaction along with a lien waiver and paid receipt.
Any way you look at it, the Closing does not relieve the Seller of the Seller’s obligation to complete improvements and repairs required by the contract. (Sales Contract: paragraph 19, lines 347-348)
If you have any questions or need assistance please contact your ITC Closing Team – we are always glad to help!