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This is the ninth installment in an on-going series of posts dedicated to helping 1st Time Home Buyers successfully achieve their home purchasing goals.

We have been identifying and discussing, in chronological order, key events in the home buying process. In our last time together, we talked about the importance and value of conducting a home inspection in a post entitled, “Home Inspection or Home Alone?”

Today’s topic is: “Potential Pitfalls in the 11th Hour”

Okay, so we’ve conducted our home inspection and have successfully negotiated with the Sellers for those items which need to be corrected/repaired prior to closing. We now enter into the “Pending” phase of the home buying process. Typically, there isn’t too much more drama left, but it is helpful to understand that there are still some additional steps in the transaction that may lead to unforeseen challenges or delays.

 

The Lender’s Appraisal

Immediately following the inspection, your mortgage specialist will order up the appraisal. The underwriter for your loan will need to know if the house you are purchasing is worth the value/price you have agreed to pay.

There are several possibilities that may occur as the result of an appraisal:

1. The property appraises at the full value of your agreed purchase price and with no conditions for funding. This is the most preferred result, and typically ensures a timely closing.

2. The property appraises at the full value, but there are some conditions for funding that need to be remedied prior to closing. Even though you may have conducted a thorough home inspection and negotiated the corrections with the Sellers, the Lender may still require for other issues to be resolved before they can provide funding. This is especially prevalent in VA or FHA transactions. Both VA and FHA loans typically employ more stringent standards, focusing primarily on safety and structural concerns, when conducting their appraisals. Shortly after the appraisal has been done, your Mortgage specialist will receive notification of value and the called-out conditions for funding. These additional conditions or issues will need to be negotiated with the Sellers for correction and hopefully can be resolved in a timely manner.

3. The property appraisal comes in under value. In this instance, the appraiser has determined through their analysis that the current market value of the property is below the agreed purchase price. In most cases, the financing contingency of your contract provides language which protects you as the Buyers, and offers you some options to address this discrepancy:

A. Depending on the variance amount, you may be able to ask the Seller to lower the sales price to match the appraised value.

B. As the Buyer, if you have the resources, you can bring in cash to make up the difference.

C. In some instances, depending on the type of loan, you can request that the Sellers pay for a reappraisal by another company that is acceptable to the Buyer’s lender.

D. If any of these options are not feasible, most financing contingencies allow the Buyers to back out of the contract and retain their earnest money deposit.

Homeowner’s Insurance

Since I haven’t covered this point yet, now is as good a time as any. Typically, once you’re under contract, as a Buyer, you will want to make contact with your insurance agent to determine if the property can be reasonably insured. There may be instances where the current owners have submitted significant claims against the property, thereby making homeowner’s insurance very costly or difficult to obtain. Once again, your contract should contain language that protects you in this event, and allows you to terminate the contract, if necessary.

Seller’s Remorse

This rarely occurs, but it needs to be mentioned. Every once in a great while, a Seller may have second thoughts about letting go of their precious home and treasured memories. If you’ve ever seen the Steve Martin movie “Father of the Bride” you’ll understand exactly what I’m talking about.

As a professional agent, I always counsel my Buyers not to worry or be overly anxious about these kinds of issues and the potential for challenges to occur. If and when they happen, we’ll deal with them head-on, and work with the Sellers to achieve a mutual resolution agreeable to both parties.

Hopefully, with a capable, professional agent working hard to represent Your Best Interests, the 1st Time Home Buying process will be a smooth and enjoyable adventure!

For the final installment, go to Are We There Yet?

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Tags: bremerton real estate, first time homebuyers, ftb, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate

This is the eighth installment in an on-going series of posts dedicated to helping 1st Time Home Buyers successfully achieve their home purchasing goals.

We have been identifying and discussing, in chronological order, key events in the home buying process. In our last time together, we talked about the key ingredients to making a well-drafted offer in a post entitled, “Make Them an Offer They Can’t Refuse!”

Today’s topic is: “Home Inspection” or “Home Alone?”

  So, by this point, your offer has been accepted and you’re under contract with the Sellers. The next major step in the home buying process is the Home Inspection. We had touched briefly on this subject previously in the series (“Do I need $$$ to Buy a House?”), but now, we will deal with it at length.

Here are some commonly asked questions & answers regarding Home Inspections:

• Why do we need a home inspection? Regardless of how new or well maintained a house might be, you owe it to yourself to have a qualified professional inspect the home thoroughly. The old adage definitely applies here: “An ounce of prevention is worth a pound of cure.” Meaning that it is better to pay for a complete inspection up front, than to discover some more costly problem after the house is yours!
• My Uncle is a handyman/contractor. He says he can do our inspection for free! You may have a relative or friend that is handy, or has construction experience, but you really need to use the services of an experienced, certified professional. Ask your Agent to recommend several inspectors. Interview each one. Shawn Martin, of Martin Home Inspection Services in Vancouver, WA suggests you ask the following questions: What is their experience and qualifications. Are they licensed or certified? Do they belong to an association? Do they have insurance? What specifically does their inspection cover? What kind of documentation or final report will they provide upon completion of the inspection? What happens if something major is discovered AFTER closing that that inspection missed?
• How much does a Home Inspection cost and how long will it take? Most inspections typically run about $300 to $500, depending on the size of the home and the extent of the inspection. In some states, this cost includes a full pest inspection as well. You can figure approximately 2 to 3 hours for the inspection, again varying on the size of the house.
• What is normally involved in a Home Inspection? Most Home Inspections involve a complete evaluation and assessment of all structural, mechanical, electrical, and plumbing systems and their primary components. Your inspector will want to make sure that the home is safe, structurally sound, and that all primary systems are operating properly.
• Should we be present during the Inspection? I always advise my Buyers to attend the Home Inspection. You can learn a lot about a house during this time. A good inspector will take additional time with the Buyers to point out the features and functions of various systems in the home. Moreover, if any problem items are identified, you can see them first hand.
• What happens if the Inspector finds something major wrong with the house? Once again, Shawn Martin also advises, “Don’t get too excited and worked up. 1^st Time Buyers have a tendency to over react when a negative inspection issue is identified. Almost every house is going to have something come up on the inspection report.” However, if there is a huge defect that is uncovered, you will usually have the opportunity to request the Sellers to remedy or repair the problem. It is a negotiation process. The Sellers may agree to your request, or simply offer a credit at closing. In most instances, if the Seller’s response is not to your liking, you can elect to back out of the contract and retain your earnest money. Consult your Real Estate Agent for specific rules and regulations that are applicable to your particular region.
• Are there other inspections we might need to have done? As I have mentioned before, in some States, a full pest inspection is included in with the cost of the Home Inspection. If not, one should be conducted by a licensed pest inspector. Additional inspections may be required, depending on the property, such as septic or well. Sometimes these additional inspections are required by contract to be paid for by the Sellers or can be negotiated, as such, into the contract. In addition, your Home Inspector may determine that further inspections be performed by more advanced and trained specialists – i.e. roofing contractors, heating & cooling technicians, etc..

Once the inspection is completed and all relevant issues are resolved to the satisfaction of both parties, the transaction moves forward into a “Pending” status, and you’re the next step closer to successfully achieving your 1^st Time Home Buying Adventure!

For the next installment, go to Potential Pitfalls in the 11th Hour

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Tags: bremerton real estate, first time homebuyers, ftb, home inspection, kitsap real estate blog, port orchard real estate, poulsbo real estate, real estate blog, seattle real estate blog, silverdale real estate