Escrow for Repairs process with a REO

[Paul Stewart]

Hey 

So I have been in negotiations on a foreclosure property. The property needs about 10k in repairs in the property. The price they are asking for I believe in my opinion is the ARV price. The Bank is offering a sellers escrow for repairs to maintain there asking price. All the damage in the property is cosmetic. I'm waiting to hear back from the bank on what the repairs consist of. My question is how does a sellers escrow for repairs work? Has anyone done a deal like this with a REO property? I googled it and got a basis of what it means but want to get a more in depth answer and a step by step of how that process works. Thanks in advance for any help that's sent my way.

[Christopher Phillips]

@Paul Stewart

Nothing complicated about it. Most common way mandatory repairs/issues are dealt with.

As an example, let's say they need to install handrails in order to qualify for FHA financing. Instead of holding up the closing, some of the proceeds from the sale will be held in Escrow until the seller fixes the needed repairs. The deal gets to close on time, the work gets done, the work inspected to the buyer's satisfaction, then the money is released form the Escrow.

This can work just as well for open permit issues and other paperwork that might take too long.

Anytime you ask for repairs, you risk holding up the closing. Sometimes it's easier just to get money knocked off the price and do the work yourself. But, sometimes the issues needed to be dealt with might prevent some types of financing, so the Escrow method is one way to stay on track.

This also assumes, of course, the lender agrees to it.