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 accurate. A buyer of a commercial property may also have a complete environmental audit performed and/or soil test, if required by the lending institution.
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 can go all the way to closing. For instance, a buyer’s purchase is contingent upon their ability to obtain the desired financing for the purchase. It may also be contingent upon the sale of another property which would involve some very specific forms to be a part of the contract. Other buyers may not want to complete the purchase if the inspections do not meet their expectations..
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 relevant documents, requests a renegotiation of the terms of contract which might include repair negotiations or price negotiations to name a few.
How do you respond objectively and fairly to the buyer when a renegotiation is requested, while acting in your best interests? This is when a professional listing agent can make a real difference in the outcome of the transaction. Having dealt with various property sales in the past, our experience will help you navigate the process and hopefully sail on to a smooth closing.
Loan Approval and Appraisal.
If your buyer is financing their purchase, their lender will verify the buyer’s credit worthiness leading up to the closing. The lender will also order an appraisal of the property to ensure that that the property meets all of the lender’s underwriting guidelines. It is helpful to know that a prospective buyer has already met with a lender prior to making an offer on your property. They should be able to provide a letter of pre-qualification from their chosen lending institution that will alert you to the fact that they have begun the process of qualifying for their loan.
