Let’s say I have a property where I am getting 100% financing. The property needs new flooring since the current flooring is a bit worn. The seller agrees to a $10,000 allowance (or whatever) for the flooring.
When the deal closes, does title cut me a 10k check?
Thanks
Most lenders would require the work to be done before closing. The work would typically be done by a licensed contractor and paid for out of escrow
You could also have the seller agree to discount the property by $10K, and then a bank like Wells Fargo will a lot of time give a home equity loan or line of credit for home improvment for a small amount like this. Wells, for example, does a computer automated appraisal, and it seems to come out high in most cases from what I have seen. They will take this value just 3 months from closing instead of using sales price. A bank may also give a home improvement line without securing as a mortgage for a small amount like this.
The seller could give you the check outside of the escrow so it doesn’t affect the transaction or the sale/loan amount. Hopefully you have an appraiser who wont notice the floor damage and aim their cameras above waist high. If the lender finds out, they wont do the loan until repairs are completed because they would have to do it themselves in the event of foreclosure.
I think I was misunderstood. I am not buying a junker. I am talking about a nice home where the carpet has a few spots, is a little worn, etc.
The seller has agreed to pay for all the carpet to be replaced to get the deal done.
Evergreen
LET ME TELL YOU HOW TO GET THIS DEAL DONE RIGHT and YES IT CAN BE DONE. IGNOR EVER ONE elses comments they are so in the BOX.
Yes you can get the 10k back at closing and it is on the HUD 1 and it is disclosed to everyone that matters so it is legal and ethical
You can do it two ways one get the 10k to go to the Carpet company or construction company directly on the HUD and 10k is the limit to do it this way
Second is to have the seller pay you through your LLC off of the HUD 1 unlimited this way.
If the condition of the flooring will affect the appraised value, the underwriters will probably make it a condition of closing to either have the work done, in which case they will hold the amount until a contractor can issue a completion or the someone goes out to inspect the repairs were done or they will reduce the sales amount by the value WITHOUT the repairs done. This may affect your loan amount since they are usually figured as a percentage of the sales price.
If you put it in the purchase contract, it will alert an underwriter that something major need to be done and they may require a 2nd inspection or another appraisal to make sure the property’s value is there without the repairs.
If it wont affect the value of the property if the flooring isn’t repaired, you can get your check through escrow.
If you want the check in hand so you don’t have to contract with a carpeting company and can do the repairs yourself at a lower cost, you should do it outside of escrow for the easiest resolution to your problem.
But your best bet is to probably just ignore me.
Ok thanks.
One reason for the allowance might be that the seller has green carpet, I like blue, and he/she will give me the money to switch to blue carpet. Value is still the same.
Thanks all.