Escrow Inspections and Appraisals

Inspections and Appraisals

Most buyers will have the property inspected by a licensed property inspector within the time frame that was agreed upon in the effective contract to purchase. Some buyers will have several different inspectors inspect the property, if they wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structure). If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution via third party. This is done so that the lending institution can confirm their investment in your property is sound.

The Closing Agent.

Either a title company or an attorney will be selected as the closing agent, whose job is to examine and insure clear title to real estate. After researching the complete recorded history of your property, they will certify that 1) your title is free and clear of encumbrances (eg. mortgages, leases, or restrictions, liens) by the date of closing; and 2) all new encumbrances are duly included in the title.

Contingencies.

A contingency is a condition that must be met before a contract becomes legally binding. For instance, a buyer will usually include a contingency stating that their contract is binding only when there is a satisfactory home inspection report from a qualified inspector. Before completing his or her purchase of your property, the buyer goes over every aspect of the property, as provided for by purchase agreements and any applicable addendums. These include:

• Obtaining financing and insurance;
• Reviewing all pertinent documents, such as preliminary title reports and disclosure documents; and
• Inspecting the property. The buyer has the right to determine the condition of your property by subjecting it to a wide range of inspections, such as roof, termite/pest, chimney/fireplace, property boundary survey, well, septic, pool/spa, arborist, mold, lead based paint, HVAC, etc.

Depending on the outcome of these inspections, one of two things may happen:

1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the closing; or
2. The buyer, after reviewing the property and documents, may request a renegotiation of the terms of contract. This is usually an allowance in lieu of repairs, a price reduction or a request for repairs to be made. How do you respond objectively and fairly to the buyer when a renegotiation is demanded, while acting in your best interests? This is one of the times when a professional listing agent earns their money. I’m an expert at holding contracts together and creating positive outcomes. We will discuss all of your options in great detail.

Loan Approval and Appraisal.

You will want to accept an offer from a buyer who has a lender’s pre-approval, approval letter, or written loan commitment, which is a better guarantee of loan approval than a pre-qualification.  Around the second week of the contract the buyer’s lender will order an appraisal. We will be notified whether your property met value or not.  If it does not meet value, the buyer may ask to renegotiate the sales price.  The may also have the option of terminating the contract depending on the terms of the contract.