Escrow, inspections, and appraisals: The Process, Step-by-Step
The Initial Agreement and Deposit.
The purchase agreement is a legal arrangement between a potential purchaser and the property’s owner.
Some essential tips to keep in mind to streamline the process:
- Keep written records of everything. We will assist you in drafting all the paperwork for your purchase and ensure you have copies of everything.
- Stick to the schedule. Once you open escrow, you and the seller will be given a timeline to mark each stage in closing. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. We will keep you constantly updated during the process so that you will be prepared step by step.
Escrow.
The escrow company will hold the deposit and adhere to the purchase contract terms.
The title company will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances. Some properties are subject to restrictions that limit various activities, such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.
How to Hold Title.
You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding titles have various legal, estate, and tax implications, especially when selling or upon the death of the titleholder.
Inspections.
Once the seller accepts your offer, you should have a licensed property inspector inspect the property within the agreed-upon time frame. You may opt to have additional inspectors if you want professional opinions from inspectors who specialize in a specific area (e.g., roof, HVAC, structure). If you are purchasing a commercial property, you will need 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. You may be satisfied with the condition of the property, bringing you one step closer to the close, or
2. After reviewing the property and the title, the buyer requests a renegotiation of the terms of the contract (usually the price).
Appraisal and Lending.
We will keep in close communication with your lender. 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 a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc.
Association Approval.
If an Association governs the property you purchase, escrow will request the rules, regulations, and other essential documents.
Property Insurance.
If you are obtaining a loan, your lender will require a certain amount of insurance on the property. The value will depend on the lending institution and the property’s purchase price. In addition, shopping around for insurance may save hundreds of dollars a year on homeowners 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 get a lower premium if your home has safety features such as deadbolt 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. Let us know if you need any clarification regarding escrows, inspections and appraisals.
