Having your purchase offer accepted is like winning a marathon. But hold the Gatorade - the property isn't yours just yet. During the next 30 days (or so) between when your purchase offer is accepted and when the keys are handed to you (commonly referred to as "escrow"), there are many hurdles to overcome. If you stumble on any of them, the purchase may fall through and put you back at the starting line.
Just like an athlete trains for a race, you can train yourself for the daunting final steps in purchasing real estate and limiting your risks. Escrow procedures and rules vary by state, but here are 10 of the most common problems encountered during this period, and what (if anything) can be done to prevent this from occurring. Learn about the steps that lead up to closing the deal, Read Understanding The Escrow Process.)
So what are the (10) problems that can come up and de-rail your acquisition!!
1. The termite inspection reveals extensive damage.
2. The appraisal isn't high enough.
3. There are clouds on the title.
4. The property inspection reveals major defects.
5. You get cold feet or the seller backs out.
6. Your financing falls through.
7. The property is in a high-risk area and you don't want to live with that risk (or pay to insure against it).
8. The property isn't insurable.
9. There are costly differences between your good faith estimate and HUD-1.
10. Errors prevent closing on time.
O.K. We get it! Training for a Successful Finish
Transferring ownership of a property is stressful for all parties. Lots of things have to get done in a short period of time, and there can be major ramifications if anything falls through. The process can be especially stressful for buyers, who must go through a complex, sometimes unfamiliar process and make a multitude of weighty decisions related to what is probably the most expensive purchase of their lives. First, take a deep breath and take some time to familiarize yourself with the escrow process and its potential pitfalls well in advance, and you'll be emotionally, intellectually and financially prepared to closing.
Closing "What is it...What does it mean?"
One of the most mysterious elements is the escrow process (also called "closing), which occurs between the time a seller accepts the purchase agreement and the buyer gets the keys. There is a list of about (10 steps) you can take if you intend to be an expert. Most buyers even the sophisticated ones do not. So what can you do.
(A) Only work with Realtors who come to you on referral. Having a referral is far more advantageous than spending hours on the internet attempting to learn all you can learn about someone. Your time is worth money so why waste it.
(B) Find and utilize the services of a Real Estate Attorney to guide you through the process, to break down the complicated issues into manageable bytes of easy to understand information and to serve as a check and balance to your Brokerage, Agent, Escrow and Title companies. This is the best and most assured way to take the nail biting out the process so you can relax having the knowledge that you've made the right decision and taken the right steps to insure a successful out. Summing it up, it's much better to work from a position of knowledge and strength with an advocate on your side rather than leap forward in blind faith.
So, we've given you the list of the (10) most common problems above. Amongst those ten items, where do most of the problems occur. Not knowing what you can afford, Skipping Mortgage Qualification, Failing to consider additional expenses or the unforeseen, Being too Picky, Lacking Vision, Being swept away in your emotions, Not willing to prioritize the issues and find suitable compromises, Neglecting to Inspect, Trusting that the Broker can be the be all end all of your worries and finally Not thinking about the future. And of these issues, the simplest and most important issue of them all,
Neglecting to Inspect!! Why you might ask??
For the buyer and the seller, its always tempting to be influenced by well meaning people around you. But those well meaning people can cost you money even if they have certain expertise. First and foremost, divorce yourself from opinion. To be successful one must deal in facts. Before you close on a sale, you need to know what kind of shape the property is in. Even smart people who know better have gotten stuck because they skipped this step. Watch words are Inspect, Investigate, Estimate and Inspect again. One slip of your better judgment can result in you getting stuck with a money pit or the headache of performing a lot of repairs. Remember whether it's a home or building, its business and its your money. Spend it wisely. Getting the full picture of the physical condition and then soundness of your potential investment will help you avoid making a serious financial mistake.
O.k. you're convinced. You need to order and inspection. What do you do next? How do you find a reputable Inspector? How much should it cost? Am I required to do this ?
One thing we can all agree is that even in this down economy buying property whether its home, a building, a factory or what have you is an expensive proposition and shouldn't be taken lightly. So purchasing a quality inspection from a qualified source can cost you anywhere from $300 minimum to $700 and upwards depending on the type, size of the building and jurisdiction it is located in. As a buyer or maybe even a developer, why would I fork over that amount money if I'm not compelled to by law. The answer is simple, in a round-a-bout way you are compelled by law. Simply Escrow is designed for a buyer and seller to each perform their respective diligence. There are full disclosure laws on the books that require a seller and their agent to disclose all information about a property they know about. The operative words are "they know about". Inside of an escrow contract who is to say what is known and what is not. So before you tie your money down wouldn't you like to know everything you can to limit or even eliminate as much risk as possible from the transactions.
O.k. I ordered and Inspection...So what's in it for me?
Your first clue that an inspection is important is that it can be used as a contingency in your purchase offer. Yes, a bargaining chip to help you get the right price. The contingency provides that if significant defects are revealed by the Inspector, you can back out of your offer, free of penalty, within a stated timeframe.
Alright I'm convinced but how do I find a good Inspector?
The first problem you have to overcome is the volumes of material all saying the same things from one end of the country to the other about the need and importance of property inspections. The industry has done an extremely poor job explaining to the public about the different types of Inspections, what's necessary, what's overkill, what qualifications and certifications to look for. Oh and of course the mis-guided proposition that affiliating with the (BBB) Better Business Bureau or (SNAPPI) or (Internachi) International Association of Certified Home Inspectors is an endorsement of competency. Truth be told even the state licensing only establishes the minimum standard for competency and is not any benchmark one should rely on as selection process tool. First hand experience and word of mouth referral are the keys to finding competent qualified companines.. If you are like most people in the industry you are inudated with spam advertising from people dropping fees and sliting throats to get your business. This is a clue of people who are absolutely incompetent. You should stay as far away from these people as possible regardless of their credentials. Remember in life, you only get what you pay for nothing more.
So now that you are thoroughly confused, here is the bottom line!!!
Simply, not all Inspectors are created equal. Inspectors vary in experience, ability and thoroughness and they all should at minimum produce a report covering the findings. So what sort of effort goes into an inspection? A typical inspection lasts between 2 to 3 hours and it is highly recommended that the buyer and seller be present while the inspection is being conducted to get firsthand vision, knowledge and explanation of the Inspector's findings and if necessary ask questions. Oh yes, you can ask questions. Our experience tells us that any issues the inspector uncovers and is witnessed first hand will make sense to all parties instead of merely relying solely on the photos and the report narrative.
The inspector should note at a minimum:
• Whether each problem is a safety issue, major defect, or minor defect. • Which items need replacement and which should be repaired or serviced • Items that are suitable for now but that should be monitored closely.
The really top notch inspectors will even explain that property inspection is a-kin to the 30,000 mile check-up on your car. It should be performed yearly, which can help keep an eye on issue while they are minor and recommend the proper steps to take to keep the repairs minor and not live in ignorance waking up one day to a huge repair bill. The inspection industry fails to distinguish the true purpose and nature of property inspections and their benefits. Like most advertising these days they rely on that old slogan, "You can pay me now, or pay me later", with the image of the transmission being pulled out of the family car in the background.
While its impossible to list everything an inspector could possibly check for, the following list will give you a general idea of what to expect:
Exterior
• Exterior Walls - checking for damage or missing siding, cracks and if the soil topography is excessively close in contact which can lead to pest infestation.
• Foundation - Visible or not, type, poured or underpinned, movement, cracks and settling.
• Grading - The inspector should let you know whether the grades around the property slope away from the building. If it doesn't you have a leak and damage just waiting to happen.
• Garage or Carport - Testing the garage door for proper opening and closing, check the framing and mountings if visible, proper ventilation, location of water heater, is its installation up to standards.
• Roof - The inspector will check for areas of damage or poor installation that could allow water to enter the home, such as loose, missing or improperly secured shingles, cracks or damage in the underlayments and around vents, condition of gutters.
Interior
• Plumbing - Faucets, showers, look for visible leaks, such as under sinks. They will test the water pressure, identify types of pipes and if necessary recommend a secondary inspection to determine repairs if needed.
• Electrical- Identify the kind of wiring the home has, test all outlets and make sure there are functional ground fault circuit interrupters which are designed to provide multiple layers of protection against shock or electrocution. Areas of most concern are bathrooms, kitchen, garage and outdoors. An inspector will also check the electrical panel to make sure they do not present fire hazards.
• Heating, ventilation and air conditioning (HVAC) - the inspector will examine the equipment and system to determine the age, determine if they function properly and recommend repairs or maintenance. Although in most cases it is speculation and inspector can give you an idea of the age of the ducting, whether it leaks, if there is sufficient insulation to minimize your energy consumption and whether there is the presence of asbestos.
• Water Heater - the inspector will identify the age of the unit and determine if it is properly installed and secured. The inspector should also let you know what kind of condition it is in and give you a general idea of how many years it has left.
• Kitchen Appliances - Inspectors should always check the appliances. It is often not known in advance if they are included in the sale but more is always better when communicating a complete picture. They will establish their functionality and physical condition. With the availability of (Energy-Efficient Appliances) ask your inspector for recommendations. In the end saving energy now with updated equipment will pay for itself is saved energy costs.
• Laundry room - Is it properly vented. What is the physical condition of the dryer-exhaust system and is there the potential for a fire hazard. Remember ทาวน์เฮ้าส์มือสอง an ounce of prevention is worth a pound of cure.
• Fire Safety - If the building has an attached garage does the wall separation have the right fire rating and that it hasn't been damaged in any way that would compromise its fire rating. Smoke detectors should be tested and servicing of battery backup systems should be recommended when present.
• Bathrooms - The inspector will check for visible leaks, properly secured toilets, adequate ventilation and other issues. If the bathroom does not have a window and/or ventilation fan, mold and mildew can become problems and moisture can warp wood cabinets over time.
Home Inspection Shortcomings
A building inspection cannot identify or detect everything that might be wrong with the property - it only checks for visual cues to problems that can then be repaired by handymen or qualified technicians.
Furthermore, the industry seems to want to qualify Inspectors as "Generalists" again akin to that old phrase "Jack of all trades, Master of none." In reality nothing could be further from the truth. Some inspectors new to the business and the industry lack background and a thorough grounding in the various trades that comprise a building. While others have a variety of experience compiled over years of working within the Architecture, Construction and / or State or Municipal Inspection industries. That is why opting for the cheap will not always get you the results you desire. Good Competent Qualified Inspectors at a minimum are professionals with a minimum of 30 years design & construction experience. The schools all across the nation do not qualify their enrollees on that basis which is why it is up to you the seller, buyer and agents to seek out the most qualified to limit risk and ensure a satisfying close.
Bottom Line
An inspection depending the building, its footage and its location will require a little bit of time and money, but in the long run you'll be glad you did it for yourself, the return on your investment and most of all for the peace of mind you'll derive in protecting your family will be invaluable.
Remember regardless of the type of purchase, your inspection will give you a crash course and a set of tools to use as a checklist of items to pay attention to make your investment safe and sound for years to come. Don't skip the important step. Don't be penny wise and pound foolish property purchasing is an important process and the inspection - is worth every penny.
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