I want to purchase a house for $400,000. There will be an addendum for me to receive back at closing $40,000 to do needed renovation to the house. Is it legal?
1 Answer from Attorneys
If done properly, yes, it is an allowance for the renovation.
Often what happens is that the purchaser sees that there are problems with the house and wants them fixed before buying.
The seller would then often think I don't have the money to pay UP FRONT to make the fixes to the house.
So instead of paying up front before the sale to make the repairs, the seller would make a concession as a discount for the price to the buyer to make the repairs after the closing.
The allowance from full price allows the entire amount to be financed with the mortgage. it would be important to have full disclosure to your mortgage lender so they cannot say they were misled in any way.
But it is important that all of this documentation be handled and written correctly.