Escrow Inspections and Appraisals

Turn in your earnest money

Once you have a signed agreement between buyer and seller, your earnest money is due within 24-48 hours. The earnest money or earnest deposit is sometimes referred to as “consideration,” meaning that you as the buyer put money on the table to show that you earnestly desire to purchase the property and will take the necessary steps to consummate the transaction. Earnest money is held either at a title company or in a Real Estate company escrow account until closing. At closing it will be credited towards your down payment. If you need to cancel the contract prior to closing, you will often receive your earnest money as a refund if you terminate before the contractual deadline. It is your Realtor’s job to be vigilant and notify you of the contract deadlines to ensure the protection of your earnest money throughout the transaction process.

Secure your financing

Now that you placed the home you want under contract, you need to return to your selected lender and complete your loan application. Since your lender already preapproved your loan, completing your application should remain a straight-forward process. At this point you lock in your interest rate, solidify your closing costs, and determine the estimated amount of money need to bring to the closing. As the buyer, you hold the right to shop around for the best interest rates and terms for your mortgage.

• Buyer beware: Some lenders will quote very low interest rates, but then off-set low interest rate costs behind the scenes ultimately costing the buyer more. If it sounds too good to be true, it probably is. When you compare lenders, make sure you obtain more information than a rate quote. Ask for a Loan Estimate, which itemizes all of the terms and loan expenses. When you have Loan Estimates from a few different lenders you can accurately compare apples to apples.

Complete your inspections

Buyers can choose from several different types of inspections. Payment for all inspections is due upon completion of the service and is not refundable if you decide to cancel the contract. General Inspection: This is the most standard inspection process which buyers generally choose. Costs for General Inspections range from $250 to $500, depending on the square footage of the house and the inspector selected. During the 3-5 hour inspection, they examine the functionality of all major house components of the house, such as the roof, electrical system, plumbing, furnace, hot water heater, windows, appliances, siding, grading/drainage around the house, etc. While inspectors are not structural engineers, they do look for major cracks or significant settling of the foundation. If they find damage that seems to be beyond their scope of knowledge, they will recommend that you hire a HVAC technician, plumber or licensed structural engineer to further inspect the foundation. Sewer Scope: The General Inspector will examine plumbing inside of the house only, the scope of their work does not include inspection of the sewer line. You will need to hire a sewer technician who sends a camera down the sewer line to inspect for any major cracks or blockage of the sewer line. Lack of periodic cleaning or extensive tree roots can cause clay sewer lines to crack. Depending on the location of the plumbing damage (under a grassy yard, or under a paved sidewalk or street) repairs can cost anywhere from $2,000-12,000. Radon Test: Radon is a gas emitted by the earth and is often found in basements that lack proper ventilation. Radon gas can damage the health of humans and pets. Testing for radon costs between $100 and $150. To get a proper radon reading, the house must remain air tight for the two-day duration of the test. (The front door can be opened and closed quickly to enter and exit the house, but windows should remain closed to prevent air from flowing freely.) If positive test results ensue, installing a system to regulate consistent ventilation can mitigate radon levels. For more details on Radon, click here to view our report. Depending on the type of house plan to buy, you may ask the seller to make repairs in order to mitigate any possible inspection issues. If you are buying a bank owned foreclosure or a pre foreclosure short sale, don’t bother asking them to make repairs. They won’t. These homes sell AS IS. However, we still recommended that you inspect the property so that you know about any issues before purchasing. If major issues or work beyond your ability to complete arise from the inspections, you can often cancel the contract and receive your earnest money back. However, any cancellation must take place during the inspection period.

Appraisal is ordered

Once you agree with the seller on inspection items, you can move forward by ordering the appraisal. Your lender will order the appraisal on your behalf. They typically require payment of the appraisal at this time. The appraisal informs your lender of the property’s current market value. This enables the lender to ensure that the value of your loan does not exceed the value of the property. If you are purchasing with cash, ordering an appraisal is optional. You can order an appraisal for your personal knowledge, but your bank does not require this information.

Loan completion

Overall, it takes roughly 30 days to complete the entire loan process, from signing the formal application to closing. Your lender must send the completed file to the underwriting department for review. For the underwriting department to give their final approval and issue the final figures, they must ensure that you, the borrower, and the property meet all necessary requirements. Once they fully approve the loan, they will send final figures to the title company for preparation of the closing documents. The final Closing Disclosure will show exactly how much money you need to bring to closing. You will bring a cashier’s check or send a wire for this amount to the title company for closing.