Escrow Inspections and Appraisals
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The Process, Step-by-Step
The Initial Agreement and Deposit
An effective contract agreement is a legal arrangement between a potential purchaser and the property’s seller. Depending upon the circumstances you may have:
- A contract–simple and straightforward process here and you’re on your way to the settlement table once all the i’s are dotted and the t’s have been crossed.
- A contract that is contingent–meaning there are financing issues or dependent on your selling your existing home–with a kick-out–meaning there are circumstances defined in the agreement that leaves a door open for another buyer who is able to buy.
- A contract that is contingent with no kick-out–the agreement with your seller is firm. No other buyer can come and “kick out” your contract. You have the time to settle any other matters there are that comprise the “contingency” to your contract.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. All verbal agreements of counter-offers should be written down for everyone’s sake. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
- Stick to the schedule. Now that you have submitted your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of all the tasks involved in the transaction so that each party involved does not breach their agreed upon obligations. During the process we will keep you constantly updated, so you will always be prepared for the next step.
The Closing Agent. Either a title company or an attorney will be selected by the seller as a closing agent. The closing agent will hold your deposit in escrow and will research the complete recorded history of the property (a “title search”) to ensure that the title is free and clear of encumbrances by the date of closing and that any new encumbrances are properly added to the title. This is the time to think about title insurance–so worth its weight in gold in case something was missed or hidden; title insurance pays for any fees or problems in a searched title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property. You’ll want to be sure to understand those.
How to Hold Title. (TBA)
Inspections. Once your offer is accepted by the seller, we’ll schedule a few different inspections (home structural inspection, termites are the two most common) on the property within the agreed upon time frame. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC). If you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.
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 close, or
2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).
Appraisal and Lending. When financing is involved, an appraisal will be done on the property by an independent third party to determine the value of the property for lender you’re using. It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time. There’s nothing quite like the stress of postponing settlement–movers have to be rearranged, kids’ school attendance can be affected, and, if you’re selling your current home to purchase the next one, you may find yourself in a hotel or on a friend’s couch if something blows up the closing schedule.
Association Approval. If the property that you are purchasing is conditional upon an association approval, the seller usually provides the “covenant” documents–the rules, regulations, and other important documents. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out all of the information completely and legibly so there is no delay in processing the application. If you are required to meet with the association for your approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing, so that it can be recorded with the deed in the county public records. If there are stipulations in the HOA covenant that you cannot agree to, your purchase contract can be voided.
Property Insurance. Now’s the time to arrange for property insurance. If you are insuring vehicles, that carrier is a good first choice as they will apply discounts for multiple policies. If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips:
- Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts.
- Insure your house NOT the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.
We will be happy to recommend experienced knowledgeable insurance agents for every property type.
Okay, you’re almost to the settlement table! Can you believe it? Click on the Moving In icon up top for this final step.