Repairs added into closing costs paid by buyer

[Dustin Heiner]

Hi everyone,

Does anyone have any creative way to pay for repairs for a property and include them in the closing costs?

I am purchasing a property that needs work on the septic tank.  The seller will not pay for the repairs so I will have to pay for it myself.  How would it be possible to add into the closing costs the cost of a septic tank replacement?

The reason why I would like that is because I am buying the property cash then will refinance the property at 80% of the ARV not to exceed the purchase price + closing costs.

Thanks for the help!

[Ryan Gillette]

Increase the purchase price by the amount of the repair and then include the repair as an escrowed item to be paid by the seller.

Example: Say you're buying a $150K property for $100K cash, with closing costs $5K, and septic work is $5K. Typically your max cash-out is $105K. Then you'd pay septic, and walk away with $100K. What if instead you bump purchase to $105K on the condition the seller put $5K into an escrow used to pay your septic guy (attorney holds it and releases to the septic guy). Now you're coming to closing with $105K + $5K closing costs ($110K) but when you go to refinance, the lesser of 80% (120K) and your $110K in, you walk from the refinance with $110K - the entire amount you went to closing with when you bought it.