Step one, let's guesstimate the price of a new roof. No. Let's forget about guesstimating and let's get a proposal from a roofer. Mr. Roofer says $9000.
Would it make you mad if you put on a new $9000 roof and the buyer backed out on the deal one day before closing? Let's don't let that happen.
In the North Carolina real estate sales contract that almost all Realtors use in North Carolina, we have a thing called "due diligence". We also have a escrow deposit. These two are not the same thing. If you are a seller of real estate with something as complicated as putting on a roof before closing, you need to understand both.
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| If you are selling a house in Carolina, understand due diligence |
The standard residential contract calls for the buyer to pay a fee to the seller for "due diligence". There is a time frame for "due diligence". For our example let's make it thirty days. This is a time for the buyer to do their "due diligence". Get the house inspected. Get the financing approved. Get a termite inspection. How much is the "due diligence" fee? It is whatever the buyer and seller agree to. If you read my previous article about due diligence, http://rondclimer.blogspot.com/2015/09/when-selling-real-estate-in-carolina.html you know that I believe that most sellers don't get enough "due diligence" money. Here is the important thing. Until the "due diligence" time period has expired, the buyer can back out FOR NO REASON with no penalty.
There is another fee called the escrow deposit. This is often called earnest money. This money is not the same as the "due diligence" fee. The "due diligence" fee is paid directly to the seller. That money belongs to the seller no matter what happens next. The "due diligence" fee is almost always less than a thousand dollars. The escrow deposit is a amount of money that the buyer puts in escrow with the Realtor to let the seller and the Realtor know that Mr. Buyer is earnest and sincere and intends to close. If, after the due diligence period has expired, the buyer does not close, he forfeits the escrow deposit. How much is the escrow deposit? You know the answer. The escrow deposit is whatever Mr. Buyer and Mr. Seller agree to.
This article is about putting a roof on your house BEFORE closing. How much should the escrow deposit be? The answer is it better be enough to pay the roofer.
Let's say you have entered into a contract to sale your $300,000 house. You have a thousand dollar "due diligence" fee. That money belongs to and is in the pocket of the seller. Let's also suppose that the "due diligence" time is thirty days. Thirty days go by and the buyer informs the seller that everything is A- OK. The inspection was good. The termite inspection was good. The financing is approved. "Due diligence" is over.
Now, the seller calls the roofer and authorizes him to put on the roof. How much was our escrow deposit in this example? It needs to be at least nine thousand dollars. When the roofer is finished with the job, he wants to be paid . He will be paid. If, for any reason, he is not paid, he can place a lien on the house. He will be paid. This is no problem. We close the deal and the closing attorney pays the roofer from the seller's proceeds at closing.
What if the buyer backs out and does not want to close one day before closing? Someone has to pay for that roof. That escrow deposit better be big enough to pay that roofer.
What if the buyer does not want to put up an escrow deposit enough to cover the expense of the roof? PUT THE ROOF ON AFTER CLOSING.
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