House 3K short of appraisal because garage wont be built by close

3 Replies

We listed a property at 137K. After we had the final city inspections it was determined that we needed to build a new garage because our fixes were not sufficient. So we let buyers know a brand new garage is being constructed.

Right after that we got a full price offer with a 2 week close because their home was selling and they were living out of a hotel. I told the buyers the garage might not be ready in time but we would escrow funds and write it in the contract.

We tore the old garage down and pored the pad. The builder wont be ready for 12 days....We are 5 days from close and the lender appraised the house for 134K  (3K shy of contract price) because he had to appraise it with no garage.

What are my options in order to get this deal done without walking away from 3K? The buyer needs to move in next week so I dont want to delay closing

Originally posted by @Adam Craig :

We listed a property at 137K. After we had the final city inspections it was determined that we needed to build a new garage because our fixes were not sufficient. So we let buyers know a brand new garage is being constructed.

Right after that we got a full price offer with a 2 week close because their home was selling and they were living out of a hotel. I told the buyers the garage might not be ready in time but we would escrow funds and write it in the contract.

We tore the old garage down and pored the pad. The builder wont be ready for 12 days....We are 5 days from close and the lender appraised the house for 134K  (3K shy of contract price) because he had to appraise it with no garage.

What are my options in order to get this deal done without walking away from 3K? The buyer needs to move in next week so I dont want to delay closing

See if the lender will do an "escrow holdback." If they do, then to close on time you and the seller are very quickly going to have to agree to whatever the lender wants in exchange for being willing to doing an escrow holdback at all, which fancy language aside is basically ransom money in an amount greater than the estimated completion cost, to be released once it's complete (ransoms only work if the thing held ransom is worth more than the thing you want). Appraisal to be revised to be "subject to" completion of the garage.

We funded a house with this "bathroom" in it a while back, normal 30yf. The ransom money escrow holdback was IIRC about double the highest estimate from what three general contractors said it would take to finish it.

Options are limited. Eat it, keep the sale. Push the close, possibly lose the buyer. Work a deal out with the buyer, pay on Tuesday for a Hamburger today. I doubt a bank is going to allow for a future not built garage before close, too many contingencies could go wrong.

Best option. Sell for 134k. Then get a Promissory note from the buyer for 3k, if the garage is finished by xx date. Get everything in writing. You have promised already to build it. and they are good for the 137 total. This would be paying 3k to get it done now than for you to have no incentive on when the garage is finished.

Can you just drop the price by $3k, but then also keep 3k less in escrow funds to build it? Then the buyer would need to pay the additional $3k to complete the build out of the garage.

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