Can someone dumb this down? x-post

17 years ago

I have previously written about how our builder went under half way through our build. The bank now owns the house, is honoring our contract to complete it according to our specs and has a builder that is a bank employee that is finishing it.

My question is about overages. Everything we had peviously put into the house (5000.00 down payment and about 12,000 in plumbing and electrical overages) is being counted. We still owe about 20,000 in overages related to flooring, cabinets, central vac etc.

The bank has said that everything we pay into it will count towards the down payment, but will increase the cost of the house. That is where I get lost. So basically our 32,000.00 in overages will increase the house by that much, but then, be credited back. So we are back to our original price. Why can't the money we pay in just be deducted? Which would lower the original price by 32,000.00.

Also the bank was concerned that with the upgrades that it might not appraise as high as we need and then we'd have to pay the difference.

I hope this is making sense to someone on here, because it isn't to me! Can anyone explain this in a way that someone who is clearly not a numbers person can understand? Thanks for yur help! Cathi

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Comments (3)

sombreuil_mongrel
17 years ago
The down payment is a credit, unless otherwise specified it would be deducted from the balance. The overages you paid in cash already are neutral. They should have no effect on the contract price. You don't pay for them twice. The overages you still owe on are obviously a liability, unless you pay for them before the closing. But paying the overages will not lower the contract price, because they are not part of the original contract. This is my opinion based on your above statement, I didn't look at your previous posting.
Casey
davemartin88
17 years ago
Did I understand your post correctly- let's say you agreed to build/buy a house for $100,000. Because of the $20,000 in overages, you have the original house plus the additional items you purchased like flooring, central vac so the house is actually worth $120,000. Since the overages are paid, the bank is saying you have a $120,000 house with a $20,000 down payment so you still need to pay $100,000. Is that helpful?
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rar1
17 years ago
sombreuil_mongrel is spot on and Davemartin is close. Using his example:

$100,000 Sales price
+$32,000 Upgrades
$132,000 total cost of the house

-$5,000 down payment
-$12,000 upgrade payments

$115,000 New balance.

-$20,0000 cash payment from homeowner for add. upgrades

$95,000 Final balance

This would be the final amount that you would have to finance if the house did appraise for $132,000+.

Now for the bad news...If the house only appraises for the original $100,000 sales price, and assuming the bank requires 20% down, you would still need to pay $15,000 at closing just for the down payment, leaving a financed balance of $80,000. Your total cash out for this example would be $52,000 for down payment and upgrades!!!!

You should contact a real estate agent or an appraiser and find out the comparables are for your neighborhood and compare that to what you think the final cost of your house will be.

Hope this is helpful. Good luck and I hope it works out for you.