The Appraisal and Determining Property Value

The appraisal process is a crucial step in the real estate transaction, as it helps establish the fair market value of a property. Real estate agents rely heavily on the Multiple Listing Service (MLS) for accurate and comprehensive property information. The MLS provides detailed insights into various factors that influence property valuation, including desirable amenities, scenic views, renovations, and overall condition.

It is important to note that the buyer’s lender is responsible for ordering the appraisal. This independent assessment is conducted by a licensed appraiser who evaluates the property based on comparable sales and market conditions.

Buyers should be cautious when relying on online platforms like Zillow and Trulia for property value estimates. These platforms do not have MLS affiliation, which can lead to unreliable valuations. In fact, their estimates often average 6% below actual market value, with discrepancies particularly pronounced in high-demand areas, where Zillow’s estimates may significantly undercut true property values. For an accurate understanding of a property’s worth, it is always best to consult with a qualified real estate professional and rely on MLS data.

Loan Contingency: A loan contingency is a clause in a real estate contract that protects the buyer by ensuring that they can secure financing for the purchase of the property. This contingency allows the buyer a specified period to obtain a mortgage or loan approval from a lender.

If the buyer is unable to secure financing within the agreed timeframe, the loan contingency allows them to back out of the contract without penalty, ensuring that they do not lose their earnest money deposit. This clause is crucial for buyers, as it provides a safeguard against the risk of being obligated to purchase a property without the necessary funds. It also gives buyers time to explore different financing options.

An Inspection Contingency is a clause included in a real estate contract that allows buyers to have a property inspected by professionals within a specified timeframe. This contingency gives buyers the right to assess the condition of the property and identify any potential issues, such as structural problems, plumbing, electrical, roof concerns, or pest infestations.

If the inspection reveals significant issues, the buyer can negotiate repairs with the seller, request a credit, or, in some cases, withdraw their offer without penalty. This contingency is crucial for protecting the buyer’s interests and ensuring they are fully informed about the property’s condition before finalizing the purchase.

How Inspections Work

General Physical Inspection Process

As your agent, I want to ensure you have a clear understanding of the inspection process. If you don’t have a preferred inspection company, I recommend using EliteGroup Elite Inspection Professionals. They conduct thorough inspections of the interior, exterior, crawl space, and attic of the home.

If any mold-like substances are detected during the basic inspection, they will be prepared to swab and send samples for analysis with your approval. Should they encounter any issues outside their expertise—such as foundation, termite, or roofing concerns—they will advise you to seek further professional inspections. We can arrange any additional inspections during the contingency period.

The inspection cost is based on the square footage of the home. Inspections usually start at 9 AM, noon, or 3 PM and typically takes between 2 to 4 hours. At the end, the inspector will provide us with a verbal overview of the home’s condition, followed by a detailed written report with pictures emailed to us within 24 hours (please note that mold testing may take longer).

You are welcome to arrive at any time during the inspection. I can text you 30 minutes before the inspector is ready to discuss findings, or we can join a conference call if that works better for you.

Termite Inspection

If you don’t have a preferred inspection company, I recommend Del Rio Pest Control. They perform comprehensive inspections of the interior, exterior, crawl space, and attic, as well as checking for subterranean termites. Following the inspection, you will receive a detailed written report with pictures emailed to us within 24 hours. Your agent will be present, but the buyer’s presence is not required for this inspection.

Inspection Expectations

Understanding Inspection Reports and Repair Requests: It’s important to recognize that no inspection report will ever indicate a perfectly maintained home, even for new constructions. While addressing necessary repairs is essential, be cautious about requesting minor fixes, as this may strain your relationship with the seller.

Inspection Period: The standard inspection period outlined in the purchase contract typically ranges from 7 to 10 days. This timeframe allows you to conduct thorough inspections and assess the property’s condition.

Coordination by Your Buyer Agent: Your Buyer Agent will take the lead in coordinating all necessary inspections, ensuring they are scheduled within the designated deadlines to keep the transaction on track.

Focus on Health and Safety: Prioritize requesting repairs that address health and safety concerns, along with credits for significant deferred maintenance items. Reasonable requests include ensuring that the water heater is properly strapped and that operable smoke detectors are installed in every room, as is required by law. This approach can help maintain goodwill and facilitate a smooth transaction.

Release of all contingencies

Each contingency in a real estate contract comes with specific deadlines, making it essential for buyers to discuss the implications of releasing each one with their real estate agent and lender. Buyers will formally release each contingency in writing as their deadlines approach, culminating in the final removal of all contingencies by the last deadline.

Once all contingencies are removed, the buyer may forfeit their deposit if escrow does not close. This situation can arise if, for instance, the buyer is dissatisfied with some aspect of the property or if their lender does not approve the loan.

These scenarios highlight the importance of maintaining open communication with your real estate agent and lender throughout the process. Doing so can help mitigate risks and ensure that you are making well-informed decisions.