Yeah, I know…I’ve just seriously dated myself by that title. And, if you’re humming along to the tune behind those words you already know where I’m going with this one! You’ve worked hard to get where you’re at in life and it’s time for a new house. Maybe you’ve raised your kids and they’re off on their own journeys now and it’s time to downsize. The reasons people buy a second or third home (or fourth or fifth) vary, but the process is almost always the same. We don’t need to be treated like first time homebuyers but it is nice to be reminded of the basics and educated about the changes that have occurred in this crazy financial world we live in!
I was talking to a homebuyer today while a home inspection company was inspecting his future house and we had a discussion about repairs. He thought we could simply ask for cash in lieu of repairs at the closing table because after all, that’s what he did 12 years ago. “Not so fast”, I told him. Yep, we used to be able to ask for cash in lieu of repairs but nowadays, every penny must be accounted for and paid to either a vendor or the lender for closing costs.
Let me explain: let’s say the carpet is trashed in a house. You, as the buyer know it needs to be replaced and the seller knows it too. A while back, we used to be able to have the closing attorney cut a check to the buyer from the seller’s proceeds so the buyer could replace the flooring with his material of choice. Well, as you can imagine, a lot of money went into a lot of pockets and never on the floors. So, Housing and Urban Development (HUD) decided that wasn’t the best way to track a seller’s expenses. So now, unless that check is cut to ABC Carpet Installer and verified by the closing attorney, it can’t be paid out.
Instead, the buyer’s agent may ask for the seller to lower her price or contribute money toward the buyer’s closing costs. We don’t say “in lieu of repairs” but for all intents and purposes, it frees up the buyer’s cash to replace the carpet by the seller paying those costs for the buyer. That’s just one example of how we can still accomplish what needs to be done while conforming to new standards.
But what if you, as the buyer, have a nice relocation package from your company that includes reimbursement for your closing costs? Well, that’s a different strategy altogether and I’d love to chat with you about it. Meanwhile, just know there are many changes over the years to learn about so you can be a savvy second, third, fourth, fifth…..homebuyer! Happy house buying!