Foundation and beam issues in escrow

[Justin Blumenthal]

My girlfriend had an offer accepted on a 1920s 2/2 in st Petersburg Florida. It's been under contract three times in three months, at least one of those fell three because of a foundation issue. Apparently there are 5 bad beams? Seller is putting $5,500 in an escrow account for the work to be done after closing. I would appreciate feedback and advice. I imagine things may change in the course of the repair, which I don't understand, and would prefer the work be finished prior to closing. Is that reasonable? Smart? Possible? Thanks!

[Jeff Copeland]

It's more likely that the lender is holding $5500 of the seller's proceeds in escrow at closing to pay for the repairs (if the seller had the money now, he'd probably have already fixed it).

In my experience, when lenders do an "escrow hold back" like this, they base it on 2-3 reasonable estimates, then add a safety margin to that. 

So, assuming the estimates came in around $4k, they might hold back $5500 to cover any surprises.

Make sure your lender & realtor explain everything to the buyer, and that the buyer understands the scope of work.

All things considered, this can be a smart tactic to get financing on a property that wouldn't otherwise qualify. Though you do lose an element of control over the work and the payment of the contractor.