Buying a home is an extensive process. If the home inspection reveals a compromised roof, it has the potential to derail everything that’s come before it.
Let's examine some solutions for fixing the roof and staying within your budget.
Lower your offering price
Depending on the current condition of the roof, it may need to be repaired or completely replaced.
Ask the home inspector what they think it will cost to properly fix the roofing situation. Once you have an informed figure, deduct the cost from the initial offering price. Tell your real estate agent to submit the changed purchase agreement reflecting the lower price.
Increase your offering price
The second option is to add the cost of the roof repair or replacement to your mortgage. This will only be applicable if the house was appraised for less than current market value. It’s a bit complicated.
For example, if the listed price of the property was $120,000, and the house was appraised for $140,000, if your lender of choice approved you for a larger loan, you have $20,000 at your disposal.
Tell your real estate agent to raise the price amount with an addendum that the seller repair or replace the roof before closing.
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Negotiate escrow terms
A third option is to change to contract so the purchase price stays the same but that the seller pays for the repair or replacement before the escrow closes.
According to Zillow's Home Buying Guide, "When you make an offer on a home, you will write an earnest money check that will be placed in 'escrow.' That means it isn't going directly to the seller but is being held by an impartial third party until you and the seller negotiate a contract and close the deal."
Another option is asking the seller to place adequate funds for the roof project in escrow so it can be repaired after closing. If you and the seller agree to this option, make sure your bank lender does not require a roof certification before the escrow closes.
If you’re qualified for a federal housing administration (FHA) loan, check if the lender can switch the loan to the 203k program.
This will roll the cost of the repair or replacement into the mortgage.
Be advised: 203k loans take a long time to prepare and finalize, so it may not be the best option if the seller wants to close on the property fast. However, it is still a valid option if you’re excited about the home and don’t mind going through another step in the process.
- Roof Financing: FHA 203(k) Loans
- Comparing Financing Costs for a Roof Replacement
- Answer These 6 Questions Before Considering a Home Improvement Loan