2 Agent Misunderstandings That Can Ruin Your Transaction

May 29, 2008 · Filed Under Ask the Realtor · Comments Off 
Two of the more common mistakes I see on real estate contracts is

  • The use of escrow “allowances” such as carpet, paint, roof or landscaping allowances for the buyer after closing
  • Incuding personal property in the real estate transaction.

The short answer is, neither of these is allowed by lenders.

Allowances / Holdbacks / Credits

The idea is, you’ll buy my house from me, at closing I’ll let the escrow keep $xxxx dollars from me for you to use on repairs to the house.

Just this morning I ran a search on the Spokane MLS for the word “allowance” and found 37 listings offering escrow allowances:

  • Buyer to receive $10k roofing allowance w/acceptable offer at closing.
  • $4,000 exterior paint allowance to buyer at closing.
  • Up to $5,000 driveway allowance, paid at funding.
  • With acceptable offer seller will offer $10,000 credit on HUD as a repair allowance to the buyers.

Seems fine and dandy, until you try and get your loan funded.  The loan underwriter will shoot this down faster and harder than Dick Cheney taking aim on a quail hunt. 

What we are NOT talking about is having the seller contribute cash toward the buyer’s loan closing costs.  This is a perfectly legitimate and accepted practice from the lender’s eyes.  What we are talking about is the seller leaving a credit, Read more

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