I have a purchase agrement in place to purchase a newly build spec home. It was built over the winter but does not have the driveway nor landscaping installed yet. It was included in the purchase agreement. The costs are close to $10k to finish. My mortgage company is saying I cannot have more than $5000 in escrow for these 'repairs' and that I'll have to fund the escrow? The builder is saying they've closed many FHA homes with similiar conditions and have never had a problem with this. They say the builders money is held in escrow until the work is completed.
I'm currently waiting to hear back from my mortgage company on this whole issue, which we've been going back and forth on for 3 weeks. I'm scheduled to close next week and getting a bit nervous. I'd hate to put closing off untill this work is complete, that may not be till June.
Anyone have any info or experience with something like this?
Thanks in advance!
I would highly recommend NOT closing until the work is complete. The reason for this is once you close, the builder has no incentive to finish the work quickly. Once it's closed and funded the builder has their money and what incentive do they have to finish this? I doubt you want an unfinished driveway for several more weeks if they decide to take their time. I believe what the mortgage company is referring to is per the contract the builder is likely allowed to use money from Escrow for building costs. So if it's 10k to finish but there is only 5k in Escrow, then the builder needs to foot the bill for the remaining 5k left to finish building. I would hope your contract states you do not have to Accept the home and/or close until these items are completed. For example, I am also doing a FHA new build. Per my contract I do not have to "Accept" the home if the costs to complete it exceed $500.
The builder stated that they fund the escrow for 1.5 times the estimated amount to finish. So, they would put $15K in the escrow and they would not get that money back until the driveway and landscaping have finished. There were 3 homes in the neighborhood that closed on friday and none of them had their driveways/landscaping finished. Currently, there are road restrictions in effect and cement trucks cannot get to the area. It's also very weather dependant.
I see now, thanks for clarifying. Does there seem to be any end to the road restrictions? I certainly understand wanting to close and get into your new home. It's certainly just my opinion about waiting until the work is finished. It may be perhaps the builder has a good reputation for finishing their work and may not be a big deal. I've just heard a lot of bad stories about closing and then some things never getting finished or corrected.