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Temporary Occupancy Certiticate. Borrowers risks?

New Contributor

Temporary Occupancy Certiticate. Borrowers risks?

I'm FHA loan approved. I'm going through my builder's lender .. my builder is mortgage broker. The closing date is already set for next month but the builder said we would go on closing with a Temporary Occupany Certificate - the loan will be held in escrow. The whole house - both interior and exterior will be completed 100% However the backyard and the front area will be pending. With the temporary Occupany ceritifcate, what risks a borrower can face? Please throw some insight

Message 1 of 13
12 REPLIES
Moderator

Re: Temporary Occupancy Certiticate. Borrowers risks?


funtertainment wrote:

I'm FHA loan approved. I'm going through my builder's lender .. my builder is mortgage broker. The closing date is already set for next month but the builder said we would go on closing with a Temporary Occupany Certificate - the loan will be held in escrow. The whole house - both interior and exterior will be completed 100% However the backyard and the front area will be pending. With the temporary Occupany ceritifcate, what risks a borrower can face? Please throw some insight


I have sold many homes by builders.

What I have personally seen, with my own two eyes, is that the builder becomes less motivated to do the pending work - no matter how small - once you close. Then getting the builder back out to complete the work is a nightmare.

 

I have never seen an entire FHA loan held in escrow though.  I didn't even know that was an option now. Years ago you could escrow for repair-type items, but not now. 

 

Maybe the LO's here can tell their experience with "escrowing the entire loan"...

Message 2 of 13
Super Contributor

Re: Temporary Occupancy Certiticate. Borrowers risks?

never had a borrower close on a temp

 

and for the reasons stated above.... i wouldnt.

 

the builder wants YOU to pay interest on the incomplete transaction... instead of them.

 

i would say no

 

i also wouldnt get legal real estate advice from a forum. call an attorney

 

Retired Lender
Message 3 of 13
Moderator

Re: Temporary Occupancy Certiticate. Borrowers risks?

^^^Agree with DallasLoanGuy - speak to a good real estate attorney NOT associated with the builder or the builders title co. An independant attorney.

Message 4 of 13
New Contributor

Re: Temporary Occupancy Certiticate. Borrowers risks?

Back to this topic - the appraisal showed pictures of couple of houses as comparables that are closed with Temporary Occupancy Certificate. This builder is a very big company and they mentioned that it is a standard practice especially when the construction start in winter (january). I kindof agree with the unfinishable landscaping because it was raining way too often as well. I'm just praying that I would not lose the house after closing and having keys in my hand with TCO. Please give me some encouraging words - i do not have time to argue with builders on this.

Message 5 of 13
Moderator

Re: Temporary Occupancy Certiticate. Borrowers risks?

Sounds like you made your decision anyway.

 

I especially wouldn't do it if it is a large builder.  There is no incentive at all for them to finish the landscaping once you close.

 

If you are hellbent on going down this road - get an attorney to look out for your interest and prepare a post closing agreement for the builder to sign regarding doing the incomplete work.  Don't go on the word of the builder, that is a receipe for disaster. 

 

 

Message 6 of 13
New Contributor

Re: Temporary Occupancy Certiticate. Borrowers risks?

if you feel its a recipe for disaster, what do you think the consequences would be?

Message 7 of 13
Moderator

Re: Temporary Occupancy Certiticate. Borrowers risks?

the work won't get done. the builder will get his funds and you won't have a leg (or leverage) to stand on,

Message 8 of 13
Frequent Contributor

Re: Temporary Occupancy Certiticate. Borrowers risks?


funtertainment wrote:

Back to this topic - the appraisal showed pictures of couple of houses as comparables that are closed with Temporary Occupancy Certificate. This builder is a very big company and they mentioned that it is a standard practice especially when the construction start in winter (january). I kindof agree with the unfinishable landscaping because it was raining way too often as well. I'm just praying that I would not lose the house after closing and having keys in my hand with TCO. Please give me some encouraging words - i do not have time to argue with builders on this.


Single most biggest investment/decision of your life and you dont have the time to discuss with builder.

 

Find the time.

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In second year post 13 DC (12-28-15)
Entered garden 05-19-2017 CLOSED ON MY NEW HOUSE 5/17/17!!!!

Message 9 of 13
Established Contributor

Re: Temporary Occupancy Certiticate. Borrowers risks?

You mentioned that it's a larger builder, which means losing money worrying about what your grass looks like may not be the biggest concern for them. 

 

You not moving in the house until everything is done IS a big concern for them because they are responsible for all payments toward the house until you take possession of the house. That's the incentive they have to finish the house and to do everything in accord to your liking. 

 

Also, I don't know about your builder, but with my builder there's a check-in that's done at 6mo and 1yr post construction to fix anything caused by wear and tear from the house settling after the first year of construction. If yours does this, I would imagine because you moved into an unfinished home, there will be a big debate about what they will and won't fix because they could easily say you did the damage. 

 

More importantly, why do you want to pay interest fees that the builder is accruing when they should be responsible for it? New construction homes takes a lot of TIME and patience. If you rely on what the builder says all the time you may very well end up screwed in the end. I agree with Junie, find the time. 

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Message 10 of 13