Help with closing terms for rental purchase

[Grace Hartman]

I am under contract on a duplex that I will owner occupy for 5% down. We are in inspection negations and have agreed to a seller credit of $7,500 for tuck pointing work (max 3% of purchase price). However the seller does not want to repair a sewer lateral because he is on and out of the hospital and cannot over see the work (so I’m being told from the agents) and is proposing to credit me money to fix. The problem is the credit I’m able to receive is already maxed out. Is there any recommendations for how to work around this or structure the agreement to have the seller pay for the sewer without it being classified as a credit? Looking for a way to save the deal without being stuck with the cost of the sewer repairs. Thank you!

[Jaron Walling]

@Grace Hartman I don't mean this in a negative way but you're in this situation due to lack of experience, terribly high contractor quotes, or a combination. Understand that, learn, and grow from this purchase. Tuck and point is NOT a $7500 repair. If your quote is that high it better involve a bigger SOW or other exterior repairs as well. Replacing a sewer lateral is easily a $7500 repair; it's probably closer to $10k, and personally I would have prioritized it over t+p. You need to place a value on these repairs and then pick your battles. 

From the sellers prospective you picked repairing/replacing bricks. You agreed to the $7500 sellers credit which is generous, and they are ready to close. Asking for additional credits could easily ruin this deal. Depending on your market, houses for sale, etc. they could cancel the contract and relist. Being a duplex that sounds pretty decent the odds are in the sellers favor they'd go pending ASAP. 

Homeowner deal with repairs and maintenance all the time. New or old every house needs work. My friends toilet just over flowed for 2hrs, leaked from upstairs, and destroyed everything below. Even with a professional inspection you can't predict the future. The only defense is saving, reserves, and insurance. Best of luck. 

[Grace Hartman]

@Jaron Walling

Thank you for the response and insight.

The seller originally agreed to fix the sewer and provide the tuckpointing as a credit. I was choosing to have the sewer fixed and throwing a bone to the seller to take on the very needed, and extensive tuck pointing SOW myself to help the deal move along.

After getting bids for the sewer the seller then changed their counteroffer to credit the repair rather than fix it.

I was the only offer on the property and the seller is motivated to close. I’m trying to decide if taking on the sewer repair is worth it or walk away from the deal, as the seller has drastically changed the repairs they’re agreeing to each time a counteroffer comes through. Thank you for your time in providing your input!

[Derek Brickley]

Hey Grace!

Is this a problem for your financing?  If so, then it could get messy.  5% down is conventional so I don't think it would show on an appraisal, in that case you could work on doing an escrow holdback i.e. the seller holds a certain $ in escrow with the title company based on the quotes you receive.  Once work is completed, it will be paid out of escrow (with the sellers money). An escrow holdback does not count towards your 3% max.

Depending how far into the process you are, you could consider raising the purchase price and do an escrow holdback if the sellers are willing so that it's net the same to them and you come with very little additional money.  You just need to be sure that it would still appraise for the agreed upon purchase price.  

[Grace Hartman]

@Derek Brickley

Thanks Derek! Is it possible to do an escrow holdback without raising the purchase price?

The title company is not very open to the idea of escrowing money so looking for a way to get them to agree to it if that makes sense. Appreciate your insight.

[Derek Brickley]

Yes it definitely is possible if the seller will agree to it.  Not sure who you're using for title, but know that same as your realtor/lender you have a choice of who you use for title and that might help!

[Jaron Walling]

@Grace Hartman Most of the time sellers offer credits instead of fixing repairs. It's easier to pay the buyer and let them deal with it. If the sewer is still functioning (sounds like it is) you get to decide what to do with the money. Maybe you change your mind and remodel the bathroom! Seller doesn't care they just want the house sold.