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Escrow Inspections and Appraisals

Inspections and Appraisals

Most buyers will have the property inspected by a licensed property inspector within the time frame that was agreed upon in the purchase agreement.  Some buyers will have several different inspectors inspect the property, if they wish to obtain professional opinions from inspectors who specialize in a specific area (roof, septic system, HVAC, etc.).  If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution through the use of a third party.  This is done so that the lender can confirm that their investment in your property is accurate and secured.  A buyer of a commercial property may also have a complete environmental audit performed and/or soil test, if required by the lending institution.

The Closing Agent

Either a title company or an attorney will be selected as the closing agent, whose job is to examine and ensure clear title to real estate.  After researching the complete recorded history of your property, they will certify that 1) your title is free and clear of encumbrances (e.g. mortgages, leases, restrictions, or liens) by the date of closing; and 2) all new encumbrances are duly included in the title.


A contingency is a condition that must be met before a contract becomes legally binding.  For instance, a buyer will usually include a contingency stating that their contract is binding only when there is a satisfactory home inspection report from a qualified inspector.

Before completing his or her purchase of your property, the buyer goes over every aspect of the property, as provided for by purchase agreements and any applicable addendums.  These include:

  • Obtaining financing and insurance;
  • Reviewing all pertinent documents, such as preliminary title reports and disclosure documents;
  • Receiving and reading any condominium or homeowners association documents;
  • Researching the flood zone, tax district, and school zone that the property is in;
  • Inspecting the property.  The buyer has the right to determine the condition of your property by subjecting it to a wide range of inspections, such as roof, termite/pest, well, septic, boundary survey, pool/spa, HVAC, etc.  

Depending on the outcome of these inspections, a number of things may happen:

  1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the closing; or
    2.  The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price); or
  2.  The buyer elects to not move forward with the purchase and the property is relisted for sale.

How do you respond objectively and fairly to the buyer when a renegotiation is demanded, while acting in your best interests?  This is when a professional listing agent like myself can make a real difference in the outcome of the transaction.  Having dealt with various property sales in the past, I have the expertise and a total commitment to every customer, no matter what their situation is.

Loan Approval and Appraisal.

If the buyer is planning on securing a loan in conjunction with the purchase, I will request that a preapproval letter is submitted with their initial offer.  As the buyer has the option of “shopping lenders” after the contract is accepted, I will ensure that I am informed of who their lender is within the time frame specified in the contract.  I then establish contact, and develop a working relationship with the lender.  I ensure that the loan commitment is received in a timely fashion, and that any loan conditions are being cleared in advance of the closing.

After the home inspection contingency has been cleared, the lender will order the appraisal.  The appraiser will contact me to arrange access to the home for the appraisal inspection.  The appraiser generally completes their report within 5 to 7 days of the site visit.  The report is sent directly to the lender, at which time it is reviewed internally by the underwriting team before being released to the loan offer and buyer.  Since the buyer paid for the appraisal, the seller will not receive a copy of the appraisal if the sales value has been substantiated.  If the appraisal value is less than the contract price, a number of things may happen:

  1. The buyer may approach the seller and ask for a reduction in the sales price to align it with the appraised value;
  2. The buyer and seller may agree to “split the difference”;
  3. The buyer may agree to make up the shortfall by paying a larger down payment;
  4. The parties may not come to terms in regards to price which would cause the loan to be denied.  The buyer would receive their earnest money deposit back and the home would go back on the market.

This is another instance that a professional listing agent like myself can make a real difference in the outcome of the transaction.  Having dealt with various property appraisal challenges in the past, I have experience in negotiating a favorable outcome to the benefit of all parties.