"Delayed financing" Strategy using a Repair Escrow

[Scott Culver]

I found a HUD property in my area which lists a plumbing Repair Escrow. The unit also needs carpet, paint, appliances etc., which are easy to estimate.

Why shouldn't I add all these known repairs to the escrow in my offer?

I'm considering using a HELOC to make a cash offer, and if I understand the Fannie Mae "delayed financing" rules, I'm limited to 75% of the initial investment based on the HUD-1.

If I increase my offer to include the repairs, I can effectively finance 75% of the cost. Although there is a slight increase in taxes, transfer fees, etc., everyone should be happy with the higher sales price.

BTW, I'm not suggesting padding the sales price to commit fraud, I'm talking about legitimate repairs to make the unit habitable, with receipts for the completed work.

Thank you.