"Credit To The Buyer At Closing" Means Exactly What?

Does the price go down on a home?

Let's say we have a $45,000 agreed upon price. My lender's money goes into escrow. Do I get a $1,500 check from the seller in certified funds, if the bank finances $1,500 too much?

The scenario is a seller wanting to credit me 1/2 the estimated cost to put a new roof on a home.

Do I get a check or a reduced purchase price (with the bank somehow getting their money back). Naturally, I' d like to get the money and not a reduced price, so I can work on the roof.

Alan

Comments(5)

  • mcole23rd May, 2004

    Alan,

    How was it written is your Purchase Agreement? Was it indicated that it was to be a reduction in price? Or, was it simply to be credited to you? If it was a credit, it will go down as just that, and any excess funds on your side of the line will be distributed to you. But your lender must approve of those terms, as they do have limits as to how much "credit to buyer" they will allow. But yours is just a little over 3%, which is usually acceptable to most of them.

    If it wasn’t in your original Purchase Agreement, you can either do an amendment (which will let your lender know), or just do it outside of escrow after it closes.

    I just closed on a property that I had the seller carry 10%, I put down 5% (95% CLTV), and had 3% credit come back to me – effectively reducing my down payment to 2%. Actually, I got cash out, but that’s a different story.

    I also did one on a brand new home, where the developer was offering a 10% "landscape allowance" to close in 30 days. Instead of the "allowance", I asked them do 10% cash to me after close of escrow – which they did.

    HTH

  • fearnsa23rd May, 2004

    This has not made it into contract yet. I bought time since I have the time and the seller is pressed.

    "After escrow"...would this rely on the seller just giving me $1,500 from his goodwill? Or can "after escrow" be done in a way that holds the seller accountable to pay me, such as by promissory note (which I feel I'd have trouble enforcing w/o $1-2K court costs to do so)?

    Alan

  • NancyChadwick24th May, 2004

    fearnsa,

    If the contract with the seller says that the seller will give you a credit at closing for $1,500 towards the cost of the roof, the $1,500 typically is listed on the
    HUD-1 as an amount reducing the total amount to be paid either by you or on your behalf at closing (loan plus deposit plus closing costs).[ Edited by NancyChadwick on Date 05/24/2004 ]

  • mcole24th May, 2004

    I would never rely on their goodwill. If you have any doubts or concerns, then I would just do an amendment through escrow. As Nancy points out, it will reduce the amount due from you -- not your purchase price. You’ll both have to sign, and it will have to be acceptable by your lender. But it’s not that much, so hopefully they’ll be okay with it.

    Good luck!

  • fearnsa24th May, 2004

    You're right, it seems perfect. Some lenders go 6% even, most 3% as mentioned, so thanks very much for all your advice.

    Great days.

    Alan

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