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Inspections During Escrow

Numerous inspections of your home may be made between the time you sign a purchase and sale agreement and closing day. Here are the most likely inspections:

 

 

1. Buyer's home inspection

Except in an extreme bidding war market, most buyers make their purchase contingent on a satisfactory home inspection, which usually takes place within a few days after the Purchase and Sale Agreement is signed. (In communities that use a two-document sale system, this inspection happens right after the buyer makes an offer and before the full contract is negotiated.)

The buyer hires a professional home inspector who typically spends two to four hours checking structural and mechanical system soundness. The inspector walks the roof checking its condition as well as that of roof vents and chimneys. (Sometimes a separate roof inspector is hired.) He'll check the heating, cooling, electrical and plumbing systems. He goes through the entire house room by room. He'll find a dead electrical socket and a dripping faucet, if they exist. 

He also is looking for potential problems — beyond what you've disclosed. Are there moisture problems? Cracks in the foundation? Is the property subject to mud slides?

Experts give conflicting advice on whether the seller should be home during a buyer's inspection. Most say you should insist on being there to answer questions and get a sense of the inspector's quality of work. Others say the seller should be off the property so the inspector doesn't get into some sort of ego trip and pepper the seller with questions she may or may not be prepared to answer adequately.

If you elect to be scarce, have your agent or a friend there so you feel better about strangers roaming your home. (Just make sure they know not to get drawn into conversation about the condition and upkeep of your home.)  The buyer, the inspector, and the buyer's agent are all likely to show up.


2. Creepy crawlies and wood eaters

Most houses are prone to one pest or another, whether it be termites, carpenter ants, beetles, or the conditions and organisms that cause wet and dry wood rot. Your buyer and her lender may insist on a pest inspection — and a solution if a problem is found.

Check your lender and state requirements. It may be mandatory to give the buyer a letter from a pest control company stating the house is free of termites. You could also be required to repair any termite damage. In some states the buyer pays for the pest inspection, but the seller is obligated to take care of problems up to a specific percentage of the sale price.


3. Radon

Radon is a colorless, odorless radioactive gas produced by the breakdown of uranium in the soil. It can be found almost anywhere but higher concentrations have been found in many northern states. It enters houses through cracks and well water.

Why should any of us worry about radon? Breathing high concentrations of radon is linked to developing lung cancer, among other diseases. The U.S. Surgeon General has urged that all homes be tested. There are two tests for radon — one short-term, the other longer-term.

Mitigation measures, if necessary, range from quite simple and inexpensive to costly and complex.

There is no law prohibiting the sale of a home that contains radon.


4. Lead-based paint

If your home was built before 1978 it may contain lead-based paint. The concern is that potentially harmful lead dust will become airborne. Under federal law, sellers must give the buyer a lead paint disclosure form. The law does not require testing, nor that the seller remedy the situation.

A buyer could ask to perform a test — inexpensive kits are available at hardware stores — or they could hire a lead-test specialist. One easy remedy is to simply paint over the top of the lead-based paint so no dust can escape.


5. Drinking water

A buyer or her lender may insist on a water quality test to make sure the water supply is safe. Among the possible reasons are that your house is in an area with a history of water contamination, the house is old and may have lead plumbing pipes, or you are on a private well, which means no municipality is regularly testing your water.


Negotiating Inspection Results


Who pays for specific tests and what happens as the result of inspection reports should have been spelled out in your sales contract. Did your contract obligate you to pay a percentage of the sale price to make post-inspection repairs? It likely says the buyer can get her deposit returned and cancel the deal if the inspector's report is unsatisfactory. But you want to close this deal. So if the buyer gives you a list of things she wants addressed, you need to negotiate again.
 

  • Decide which, if any, fixes will be made at your expense.
  • Perhaps you set your asking price lower than you normally would have done to allow for the cost of replacing the deck supports you knew were rotted — a condition you already disclosed.
  • Can you afford to lower your price a bit and sell the house "as is?"
  • If you make a deal, the cleanest arrangement for you as seller is to drop the sale price (which also saves you money by dropping your agent's commission and perhaps some taxes) rather than get into making repairs before closing. Get estimates on the cost of any essential work then let the buyer be responsible for the repairs.

Expect your buyer to ask that repair money be held out of your sale proceeds and kept in escrow until repairs are completed to her satisfaction. This can be a squishy option for sellers, especially those who need maximum sale proceeds to close the purchase of their next house.



Tips

  • Be sure to get a copy of the buyer's inspection report. Compare it with any inspection you had done before putting your home on the market. (If their inspector found something yours didn't, you can get your inspection fee back.)
  • Keep your bottom line in mind — the money you must have from this sale to make your new home purchase work.
  • Remember how important market conditions can be in determining your clout. Are you in a seller's market or a buyer's market?
  • Look for solutions that work for you and the buyer. Each situation is different. Consider lowering the sale price and letting the buyer arrange for work and pay for fixes.
  • Remember that you are responsible for keeping appliances and basic electrical and plumbing systems in working condition through closing day. 

You may have to hire someone to take care of a problem if it is critical to closing the deal. You can see why hiring your own inspector before putting the house on the market is a good idea if you want no surprises at this stage of your sale.

 By Diane Tuman

Next article: Title Issues for the Seller

Previous article: Escrow for the Seller



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  • Last edited October 12 2012
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