I have read your blog today for the first time and feel so heartened that there are such great honest people out there like yourself. I would love to connect with you and see if we can help each other. I work for a wonderful retirement community in Redmond called Fairwinds that is a place for independent seniors that are tired of living in their homes and want to be free to travel and enjoy life without the responsibilities of a home. If you have any seniors in the Redmond area or that want to move to the Redmond area after selling their home, please contact me. I too would feel comfortable referring prospects that are needing to sell before they come to us. Its a wonderful thing to find a person whose ethics are intact. What a joy!

Based on experience, the buyer who is tight on money is more than happy to have a new roof prior to closing. It is more often the buyer that isn’t tight on money that want’s to control the work product and take the seller credit against a more costly job.

Real Examples: Dishwasher breaks. Warranty company will replace with “like kind”. New owner wants top of the line stainless steel. Warranty company gives homeowner a cash amount of $340 which they apply to the new dishwasher that costs $500.

Roof: Buyer not able to pay anything and wants roof on before closing. Seller’s agent advises that new black roof going on this week. Buyer freaks out and hates black roof. Able to get some options as to color, but not as many as buyer would have if they hired the roofer. A lot of scrambling to keep that black roof from getting on to that house.

When we negotiate inspections, we walk a fine line of what should be fixed prior to close, and what should be a credit. Credits are for items that have the potential for the buyer to be unhappy with the fix. Seller only has to replace with “like kind” and buyer may want to upgrade. We can’t have the buyer paying the seller for the upgrade prior to close.

While your example of “lender needing to foreclose” is sometimes relevant, it is less relevant than real life real estate where the lender doesn’t need to foreclose.

My rule is seller fixes prior to close if there is any hazard involved:

1) Hot water tank could blow any minute – replace ASAP prior to close

2) Wall heater is a dangerous recalled model – replace ASAP prior to close

3) Electrical Panel is insufficient amperage and full of cockamamie after market add ons beyond panel capability – fix and upgrade prior to close

As opposed to:

Roof has 3 year’s left, seller gives partial credit for new roof that is not needed today. This way buyer gets to pick color and type of flashing and hire a roofer of their choice.

Even if the roof has two to three year’s, we can’t say “toward roof” on the addendum.

Portion of fence is rotted: Buyer wants a new fence in six months or so. Wants a credit toward new fence and not the current one fixed. Fixing the fence would be a waste of money as that fence is going to the dump in six months.

I can see where the lender would not allow some repair credits and would want to have something fixed prior to closing. But the current advice to NEVER use the word repair on an addendum, is not practical for a real estate transaction.

There is no getting around the fact that all repairs cannot be made prior to closing on every financed property sold in this Country, and some need to have repair credits. That’s the real world.

As to your “not (being) mad”, This is an issue that effects all home buyers across the Country. It is not personal to any of us.

It is an industrywide issue that buyers are expected to hide the truth in some instances, and then chastised from hiding the truth in others. Sending mixed messages to the consumer about hiding the true facts from the lender, opens the door to hiding more truths than those the industry “asks” them to hide. It’s like saying “Only hide the truth when we say so, and not when we don’t say so.” Not fair and really doesn’t work.

What happens if the buyer receives the $10k for the roof to be repaired after closing and once the they begin the work, the roof cost is actually $15k and not $7,500? They don’t have the money, they have to borrow and increase their monthly debts. And begins to slide down a slippery slope.

The lender does not want to own a house they had to foreclose on and if they do own it, they don’t want to deal with a bad roof, too.

Some things should be fixed, yes. But here’s the problem. The buyer is the one who has to live in it, not the seller. The buyer may want a top of the notch roof that costs $10,000, but the seller doesn’t have to provide that. Should the buyer live with the $7,500 job, when he is more than willing to pay the difference and get the better job after closing? He wants the seller to give him (or the roofer direct) $7,500 toward the new roof and pay the difference and get the roof he wants on his house.

Given these and many other issues, credits often are the best answer for the buyer. It isn’t “pragmatic” for lenders to pretend every house is perfect, by never wanting to see the word “repair” on an addendum.

Once the only acceptable answer is to lie to the lender…where do you draw the line on “lying to the lender”? You told me to lie to the lender over here and then get mad when I lie to the lender over there. I can see how many consumers can be confused about “the rules”.

The lender is not lying when they inform a buyer and/or selling agent that their underwriting guidelines will not accept $10k credit towards a faulty roof or faucet or whatever the repair is…however, guidelines will allow x$ towards closing costs…or the price can be reduced $10k or the work can be completed prior to closing. The lender is providing what ever possible options are available within the loan parameters for that transaction.

The buyer is commiting fraud (lying) when they say they’re going to reside in the property, but they don’t and never intended to.

Here’s the problem with that. You tell a consumer to put “toward closing costs” when it is to replace a bathroom faucet, for example. So you have told them to call something different, than what it really is. Why? So the loan will go through and fund.

Then they want to do basically the same thing, say it is owner occupied when it isn’t, to get a better rate and terms, you say “Oh no, that is lender fraud!” (you meaning the lending industry, not Brian personally).

How does a consumer know the difference and lie when you say so but not when you don’t. The answer can’t be “to be intentionally vague” as that would make the answer to the question, “Are you going to live in the house?”: Possibly, maybe, I could.

Intentionally vague transcends from where WE want them to be intentioanally vague to our purposes, into their being intentionally vague to suit their purpose. Not fair to say yes to the former and no to the latter.

Maybe the answer is to be intentionally vague. Just offer it as a seller’s concession.

Can’t tell you how many times a mortgage broker has said, don’t put THAT, just say it is toward buyer’s closing costs.

Lenders don’t make anyone lie. Lenders allow a percentage of the sales price for NRCC, not repairs. Most 100% programs allow up to 3% seller credit. Lenders don’t want to “finance” more than the value of the home.

If the home is in disrepair, it should be fixed or a credit can be given, It will, however, NOT affect the buyer’s downpayment. If the seller want s to credit $10,000 for the painting, the lender won’t finance that amount and reduce the loan amount.

Don’t lie to lenders. Don’t take the advice of a lender’s rep or mortgage broker to lie. If, closing costs are paid by the seller, as a concession for cosmetic repairs, and it fits into the lender’s guidelines, write it up.

Let me give you an example. I sold a home in Phoenix. The seller asked for certain cosmetic repair items; I offered a washer and dryer as a concession. I could have easily offered a concession of $2,000 to be applied as the buyer saw fit. If it was under the limit for seller concessions set by the lender’s guidelines, I would be fine.