Bye bye escrow

The house is in need of carpet, and our agent recommended a flooring company he's worked with on investments. So on Thursday we met the agent and the flooring guy at our house to look at samples and take real measurements.

Our agent gave us a rough estimate of what the flooring guy thought it would cost to do both the needed carpet and wanted laminate. The repair escrow was set at $2,400 and the estimate put carpet at $1,200. We might as well do the laminate flooring before we move in and use the rest of the escrow money to cover at least part of the cost. The flooring guy said the laminate would add $1,600 to the cost. Brad and I talked it over and decided we could swing the additional $400.

We look through the samples and choose a light berber carpet for the entire house (well, except bathrooms and the laminate area). We also chose a laminate option that closely matched the current kitchen cabinets.

The flooring guy takes measurements and looks disturbed. When our agent gave him rough measurements, he says, the agent didn't tell him the living room area. That would take the cost of carpet from $1,200 to $1,900. (Brad said the omission was too "convenient" and wondered if it was a scam on the part of the agent and the flooring guy).

Lucky for us, I planned to add $1,000 to our repair escrow to pay for the laminate, so the new flooring quote was very close to what I thought it would cost in the first place. We OKd the flooring guy to order our carpet and laminate, then went on our merry way.

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I got a call from our agent the next day with bad news. He had never handled a foreclosure with a repair escrow, and he was mistaken. The repair escrow isn't just free cash attached to the house, it is the amount HUD says they will add to the purchase price to cover the needed repairs if you choose to get an FHA-insured loan with a special program designed for renovations.

Bottom line: there is no money for carpet and laminate.

The agent said we had two options. The first would be to go to the mortgage company and ask them about our FHA loan options, which would then tack on the repair escrow amount to our loan. I have been on the mortgage company to get this house to closing ASAP, and this is just the thing that will ruin our plans, I told the agent.

That's when he made a generous offer. Since the mistake was on his part, he offered to eat the cost of the repair escrow from his commission. He didn't know how "legal" that was, and he said he would talk to the closing lawyers. Such a donation to our cause would cut his commission in half.

Something just doesn't seem kosher about the donation. Part of me says since I threw such a hissy fit over the earnest deposit fiasco that he feels he has to prove his loyalty to us. The other part says this agent is in business to make money, not give it away, and this is just a ploy to keep us on board until closing when he can stick us with his buddy's flooring bill.