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Inspections
Professional inspectors can save you money and headaches. They are trained to spot problems that you would never notice. They are also impartial. Their vision will not be clouded by the emotions you'll feel if you're in love with the home. Your offer should contain a contingency stating what to do in case defects are discovered during inspections.
Inspectors give you a detailed account of the property's current condition. If you are purchasing a new home, it will probably come with an express warranty and shouldn't require professional inspection. However, you may want to order one anyway to protect against shoddy workmanship.
Common Types of Inspections
• Structural: The state of the foundation, roof, walls, and deck
• Pest: Damage by termites, molds, dry rot and other destructive organisms
• Electrical system
• Plumbing
Reports
You should receive a written report of the results of the inspection. It's wise to accompany the inspectors on their visits, as it's easier to explain problems and methods of correction on site. You'll gain a sense of the relative importance and cost of what needs to be done so that you can act on the report if necessary.
How to Find Inspectors
Ask friends, relatives, and associates who have recently purchased homes. Ask your real estate agent. Call HouseMaster of America at 1-800-526-3939. They can give you names of professionals in your area.
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Disclosures
Disclosures reveal specifics about the property and its surrounding area which affect its value.
They can come from:
(1) The seller, in the form of a Transfer Disclosure Statement, required by law in some states.
(2) The agents involved in the transaction (This is covered in Preparation: The Role of the Agent.)
(3) Experts in a particular field, such as geologists.
Transfer Disclosure Statement
This describes all major items on the property including: appliances, heating and cooling systems, burglar and fire alarms, fireplace, roof, sprinklers, antennas or satellite dishes, saunas, pool, security gates, built-in barbecue, gazebo, patio and deck. The types of utility services and available hookups are also detailed. The statement should also contain any information about the following:
• Environmental hazards such as asbestos, formaldehyde, radon, lead-based paint, fuel or chemical storage tanks, and contaminated soil or water
• Structural modifications not up to code, or completed without permits
• Damage to the property from natural sources such as earthquakes, floods or tornadoes
• Neighborhood noises or other nuisances
• Lawsuits affecting the property
Technical Information
This must come from professionals. Geologists should examine the location to determine whether it's subject to natural disasters. You may need a geological study before you can secure a permit for new or additional construction. If the site is in a Geological Zone or Special Studies Zone, lenders may mandate earthquake insurance. If the house is in a Flood Zone, some lenders will require flood insurance.
Acting on Disclosures
After you receive the transfer disclosure statement and any other reports, you usually have a fixed amount of time to accept the property or re-negotiate the contract
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Final Steps
Pay careful attention to these issues in the final days to ensure that the sale closes properly.
Title
Title is the right of ownership to a property. You must assure that you have clear ownership by ordering a search from a title company. This verifies that the current owner has title to the property, and that title was transferred correctly each time it was sold. The search will also uncover any liens.
You should obtain title insurance. If the title company tells you your title is good when it's not, you can lose your home. The insurance, paid for by the seller in most areas, protects you against any loss.
Remaining Payment
You probably had to make an earnest money deposit after signing the contract. A couple of days before the close, you must put the remaining funds required for purchase into escrow. This includes down payment, closing costs, and any prepaid items. You can estimate your costs by using the Calculating Move-In Costs worksheet.
Closing Escrow
At the close, the money in escrow is dispersed to all parties as instructed in the sales contract. This amount covers the following costs, where applicable: buyer closing costs, seller closing costs, broker's fees, seller's mortgage(s), property taxes, and any other liens. Any funds remaining after paying the required costs go to the seller.
Final Inspection
Examine the property one last time before closing. Look for any adverse changes as well as any items that were to be built or fixed prior to closing. The results of your final inspection should be documented and signed by both buyer and seller.
If any items do not match the terms of the sales contract, you have the following options:
(1) Have the seller fix the items before escrow closes. This is a common way to handle minor faults, since the closing is imminent and re-inspection difficult.
(2) If the house is new, give the list of defects to the builders. In most cases, they will make corrections before escrow closes.
(3) Have money withheld in escrow to pay for the items.
(4) Accept the property as is.
Possession
Most real estate transactions follow a straightforward pattern. The seller moves out before escrow closes and the buyer moves in afterward. However, there are exceptions.
Modification by the buyer prior to possession:
It's easier for the buyer to work on the property before escrow closes to avoid maintaining two residences. Many sellers agree to this arrangement without charging the new owner. However, the purchaser usually must forego the final inspection in this case. The seller doesn't want to be liable for any changes made by the buyer.
Seller stays on after closing:
Sellers may not want to move if the purchase of another home has not been completed. They might want to avoid finding short term housing or moving twice. If you don't need to move in right away, you may consider accommodating them. If you do, be sure to put the terms of your agreement in writing, detailing length of stay and payment. If they wish to stay a long time, check the laws governing renting, which may apply.
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