The homebuying process is one of discovery. Throughout, you will receive crucial information on the condition of the property – from its physical attributes to the condition of its title. Piece by piece, you will learn what you need to know to make an informed purchase. Following is an explanation of the most significant parts of the puzzle.
Transfer Disclosure Statement
The seller of your property is required by law to furnish you with a “Real Estate Transfer Disclosure Statement,” (TDS), in which the seller will make known to you important disclosures about that property, including any known existing conditions, any hazards or nuisances. For example, if the property drains improperly or if there are cracks in the chimney and the seller knows about it, he or she is required to let you know via the TDS.
In the TDS, the seller’s agent and the buyer’s agent are also obligated to inspect the property and to provide results regarding any known existing conditions, any hazards or nuisances. If the TDS is delivered to you after execution of the offer to purchase, you have three days if the form is delivered to you in person or five days if it is delivered to you by mail, to use it to terminate the contract if you are not satisfied with its contents.
Home Inspection Report
Just as important as the TDS is the home inspection report. While the TDS documents the property’s condition, to the knowledge of the seller, a home inspection will provide you with the additional insight of a construction expert.
As a result, I advise anyone buying a home to first have it inspected by a professional home inspector who is:
- a licensed general contractor
- a member of a recognized home inspection trade group
- has professional liability insurance
Your home inspector will provide you with a written report, which will advise you of the physical condition of the property as determined from the inspection of accessible areas. Generally, the cost is approximately $300-$500.
The report also will identify areas that could not be inspected and may recommend additional inspections by other experts in areas including roofs, foundations, soils, drainage or pools. Less usual, but also recommended from time to time, are inspections for health-related risks such as radon gas, asbestos or problems with water or waste disposal systems. While additional inspections will cost more money, they definitely are worth it if they uncover an expensive defect in the property.
A general inspector will focus on the structure, construction, and mechanical systems of the house, and will make you aware only of repairs that are needed. Generally, an inspector checks (and gives estimated prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, heating and cooling systems, water source and quality, the foundation, doors, windows, ceilings, walls, floors, and roof.
The inspector does not evaluate whether or not you’re getting good value for your money.
Usually, there will be an inspection clause in the contract. Sometimes, the seller will provide a report of a home inspection aid for by the seller. If conditions or defects are disclosed in the report you can:
- Negotiate for the seller to fix the problems prior to close of escrow,
- Receive a credit from the seller for an amount to make the repairs; or
- Cancel the contract if your and the seller cannot agree on the repairs or their costs.
It’s not required that you attend the inspection, but it’s a good idea and I strongly recommend that you do, since generally you will learn a great deal about your property. The inspection also provides a great opportunity to hear an objective opinion on the home you would like to purchase and it is a good time to ask general, maintenance questions of an expert.
Pest Control Inspection Report
While you are in escrow, you should have the property inspected by a licensed pest control professional. While termites or other pest infestations are not common, pest control operators also are trained to look for dry rot, usually caused where wood comes into continuous contact with water. Dry rot can be serious and should be fixed immediately. If any condition is discovered in a pest control report, it needs to be corrected and the property re-inspected by a certified pest control inspector, before you close the sale of the home. Pest control reports generally cost around $200-$300.
Smoke Detector and Water Heater
During the escrow process, sellers are required to provide for you evidence that they have equipped the home with smoke detectors, and that water heaters are braced, anchored, or strapped to resist falling in an earthquake.
How Much Should I Offer?
Generally, I will help you with this. However, there are several things to consider as you develop your purchase offer:
- Is the asking price in line with prices of similar homes in the area? I will conduct research, called a “Competitive Market Analysis” or CMA, on comparable properties, to help you come up with an educated opinion on the worth of the property.
- Is the home in good condition – or will you have to spend a substantial amount of time and money making it the way you want it?
- How long has the home been on the market? If it’s been for sale for a while, the seller may be more eager to accept a lower offer.
- How much mortgage will be required? Make sure you really can afford an offer that you plan to make.
- How much do you really want the home? The closer you are to the asking price, the more likely your offer will be accepted.
Common points of negotiation
The buyer and seller may negotiate many of the associated costs of the transaction. Some common items are: price, financing, closing costs, repairs that need to be made, appliances and fixtures, landscaping, painting and occupancy time frame.
Offers are occasionally rejected outright, but it is common for a seller to counter an offer with terms acceptable to them. But don’t let this stop you. Now you begin negotiating. I will help you.
There are many options to explore:
- Maybe you offer more money, but ask the seller to cover some or all of your closing costs or to make repairs that wouldn’t normally be expected.
- Or, you provide the seller with more time to move in exchange for a price break, if you know extra time is what they need.
- Just remember – don’t get so caught up in negotiations that you lose sight of what you want and what you can afford!