10 things real estate appraisers won’t tell you – MarketWatch

Appraisers have a challenging job; their primary responsibility is to determine, the best they can, what an appropriate value for a property is, at a given time, considering all the external circumstances that are, or were in play at that moment in time. In communities like Atascadero, Templeton and Paso Robles that can be a tough order to fill. However, there are standard methods and practices that all professional, licensed appraisers should abide by in order to accomplish the goal. The onslaught of rules, requirements and regulations have made it a tough gig in recent years, and the original scope of work is just as challenging as ever.

I think that the title of this article is a bit misleading as most appraisers are working assignments for banks and that is who they are primarily coordinating specific information for. Rarely do I see consumers deal directly with an appraiser, even though it is considered part of the buyers closing costs expense. It is also usually part of the re-finance process.

I recently posted some information on appraisals and some local providers I work with. Here is another article I found that can help shed some more light on the appraisal process so you know what to look for and what to expect when it comes time for you to require an appraisal.

How To: Find a Roof Leak

Now that we have officially had our first good rain of the SLO County rainy season, some of you may have discovered a leak in your roof. You know that we are all hoping for lots of rain this season, so if you think you have a leaky roof you may want to check it out now. Having a leaky roof can lead to a whole list of problems and if you can avoid them now they won’t be an issue when you are ready to sell your home and have a home inspection performed. Water can create conditions for mold spores and other wood destroying pests to thrive. Find out where the leak is coming from, fix it and disclose it.

Here’s a piece from Bob Villa and Yahoo Homes on how to find a roof leak:  How To: Find a Roof Leak – Yahoo Homes.

Title Search and Escrow Services

When you enter into a purchase agreement to buy real property, as part of the buyer’s inspection and due diligence process, you will need a title search and title and escrow services.  A title company checks the history of the property ownership and makes sure that the title is legitimate so that a buyer can be confident that they are dealing with the true owners of the property that they are buying.  The title search also contains a legal description of the property and a chain of title, which is the chain of ownership or claims to any property rights. The title search will also reveal other important aspects of the property such as:

• Taxes owed on the property
• Outstanding mortgages
• Liens on the property
• Judgments against the property
• Easements
• Leases
• Restrictions
• Ownership of mineral rights

Once the title company checks the title and determines that it is legitimate, they can issue title insurance on the property which provides the buyer with assurances against most any claims of ownership or title rights once the property is transferred.  There are two main types of title insurance: owner’s title insurance and lenders title insurance. The buyer is usually responsible for providing lender’s title insurance and the seller the owner’s title insurance.

Many title companies also provide escrow services in addition to the title functions they perform. They collect all the monies from interested parties, follow the escrow instructions according to the buyer and seller contract and handle the payoff of loans, taxes and sales costs at the close of escrow.

The cost of title and escrow services is relative to the sales price and/or loan amount on the property. The fees they charge for their services are part of the buyers and sellers closing costs and can be negotiated in the contract. Your Broker should be able to recommend a title company that they work with on a regular basis who can provide timely and accurate services.

Here is a list of the Title and Escrow Services I work with on The Central Coast.

Mold Test and Mold Remediation

An environmental mold test can be an important part of any home inspection process.  If, during the normal course of the due diligence process – when your wood destroying pest inspection and your home inspection are being performed – it is determined that you have a “mold like growth” happening somewhere, it is advisable for you to investigate the matter further.  Mold like growth on surfaces is often pointed out and can be seen in the form of discoloration, frequently white, gray, brown, or black, but also green and other colors.

Molds are micro-organisms, or fungi, that help to decompose dead organic material, such as leaves, wood, plants and proteins. Molds grow best in warm, damp, humid conditions and they spread and reproduce by making and then releasing more mold spores into the air. When these microscopic spores, which can survive conditions too hot or sunny for mold to grow, land on a surface that has food and oxygen available, like wood or drywall, they can remain dormant until some sort of water damage occurs, which then allows them to grow and reproduce, releasing thousands or more spores into the air and repeating the cycle all over again.

The biggest causes of mold in most properties are:

• Flooding and water damage
• Wet clothes, fabrics and insulation
• Poor ventilation in crawl spaces, subfloors, basements and attics
• Condensation from pipes, HVAC systems and concrete floors
• Leaky pipes and faulty plumbing fixtures under the sink
• Leaky roofs, eaves, gutters and flashings
• Humidity and warm, moist conditions

If you do suspect that you have a mold problem remember this: in California there are no licensing requirements for people who remove mold, so you need to be informed on how to approach the issue. First, not all mold remediators are licensed contractors and not all licensed contractors are mold remediators. My best advice is to check with service provider that they are a licensed and certified by either the American Council for Accredited Certification (ACAC) or Institute of Inspection, Cleaning and Restoration Certification (IICRC).  The California Department of Health Services and the California Department of Public Health are also good resource for more information on mold like growths and how to deal with them.

The cost of a mold test can vary greatly depending upon the size of the area being tested and the thoroughness of testing.  Sometimes cabinets need to be pulled out and walls need to be opened and exposed to determine the true extent of damage. The cost of mold remediation can also vary greatly depending upon the scope of the work that needs to be done and certifications required to meet lender or homeowner requirements.

The bottom line is this: you need to do what is right for you and your family. The home inspection process is an important time to be focused and informed to make the best decisions for your family’s future.  If you suspect mold or mold problems then have it checked. It’s best to find out early if there are any problems and what it cost to fix the problem and make it right.

As a home seller, if you are aware of any issues from the past that may have resulted in the formation of mold like growth, it is best to disclose it from the outset.  When it comes to disclosure issues, especially health and safety, full disclosure is a must and always the best way to keep a buyer from claiming future damages.

Here is a list of some of the Central Coast Mold Remediation Services that I call on.

Home Inspections

Look, you’re smart, and if there is one thing you’ve learned – it’s that buying or selling a home is going to be one of the biggest financial decisions of your lifetime. You spend countless hours doing your homework on the kind of car you want to drive, the latest phone in your hand or which Paso Robles wineries you want to take out of town friends tasting at. When it comes to buying or selling a home, you have to get this right. In order to do that you need to hire a professional who knows what to look for. Your due diligence and inspection period is your time to do your homework.

Home inspection requirements vary from state to state, but a good place to start is with the American Society of Home Inspectors, the National Association of Home Inspectors, the National Institute of Building Inspectors, and the International Society of Certified Home Inspectors all of which requires uniform standards of practice in the way that home inspections are conducted.

The State of California does not require a license to perform home inspections, but it does prohibit unethical home inspection practices including making repairs on a property that the inspector has inspected. Working with a great home inspector not only gives insight as to the problems that may exist with the home, but also gives you a chance to see how things work in the home, how the home is built and steps you can take to better maintain your home. If you are selling your home it can make you aware of hidden costs that can come up in negotiations, or even help you get top dollar for your home. It can be money well spent.

Once the inspection is completed and you move forward on the purchase or sale, the Home Inspection Report can be a great reference tool for repairs or maintenance, or in some cases – the home inspector makes him or herself personally available to answer any questions or make recommendations. The home inspector cannot, however, perform the suggested repairs on a home they inspected within 12 months of the inspection.

A home inspection usually lasts for about three hours and there are some key areas that the home inspector should be focused on. The areas are:

• structural elements such as foundation and any bowing or sagging of the structure, properly aligned doors and windows
• exterior conditions such as fences, walkways, improper drainage, septic leaks, irrigation systems, or any health or safety issues around the exterior of the home
• roof condition, roof vents, flashings, damage to chimneys, gutters
• exterior surfaces of the home and condition of the surfaces, exterior lights and electrical outlets
• interior doors, windows, window and slider screens, switches, electrical outlets and any health or safety concerns
• attic space for insulation, proper ventilation and any signs of water intrusion, animal infestations, or other damages
• Interior plumbing for leaks or damage, functioning sinks/toilets/tubs/showers, proper water temperature
• appliances such as microwave oven, dishwasher, garbage disposal, oven/range, hot water heater, water softener and washer and dryer if applicable
• heating and cooling systems including condition of fireplace if applicable
• basement or crawl space to check for water intrusion or damage
• garage, garage door opener, fire safety door and condition of doors and windows in garage

When it comes time to do the home inspection, I recommend to my clients that they put on some old jeans, roll up their sleeves and be present as much as possible during the home inspection process. I encourage them to make notes, ask questions, and take the chance to familiarize themselves with the systems of the house and how things work. It can be quite interesting in what you learn and an important part of you doing your due diligence and making certain you know what you are buying. There are also some areas that the home inspection usually does not cover or that would be recommended to an inspector who specializes in that field.

Your agent can make the necessary recommendations for further inspections as needed, including:

• wood destroying pests or pest problems
• swimming pools and spas
• sewer line inspections
• septic tank and leach field
• water well and water quality
• asbestos testing
• radon gas testing
• lead paint testing
• toxic mold testing
• cosmetic damages

Like I said, buying a home will most likely be the biggest financial purchase of your lifetime. Take the time to do your due diligence, look things over, ask good questions and hire the help of a professional to point out things that you aren’t trained to look for. Do it right the first time, every time – it can make all the difference in whether or not you get this right.

Here’s a list of some of the  SLO County Home Inspection Service providers that I work with.

Pest Reports and Inspections

No one likes pests—or pest reports. The name alone implies that the whole thing is not going to be pleasant, but a pest report is one of the most important parts of the real estate transaction process, the due diligence and inspection period. If you’re buying a home, understanding what a pest report entails and how it is done is important. A pest report can also be called a termite inspection but the truth is that we are looking for more than termites—we are looking for wood destroying pests and organisms, obvious signs of infestation or damage, or any conditions that could lead to these problems.

Most pest inspectors begin the inspection by looking for signs of any pest activity such as:

• active termites
• active carpenter ants
• wood infesting beetles
• rot fungus
• damaged wood
• dead insects
• termite tubes

A pest inspection should be performed by a professional who is licensed with the Structural Pest Control Board and the inspection usually takes about an hour. You should expect the pest inspector to visually inspect any accessible areas all around the home, including attics, crawlspaces, basements and any attached buildings or garages. The inspector should also examine the exterior for any visible damage.

Often you will see the inspector working with special probes or a long metal spikes that he will try to insert into wood to determine if it is damaged. Pest inspectors not only look for current damage, but they also look for conditions that are conducive for these wood destroying pests to occur.

A pest inspector would examine many things in assessing potential problems, including:

• standing water
• wood to earth contact
• plumbing leaks
• gutter leaks
• unprotected wood
• faded or peeling paint on wood

The pest inspector would then file a report with the person who requested the report and the California Structural Pest Control Board. Statutory code requires the report to include a diagram showing what was inspected and the date the inspection took place, any finding of wood destroying insects or fungus, and to report any visible damage to the accessible areas. This is known as Section 1 work. The report is also required to identify any conditions likely to lead to future wood destroying pest problems such as excessive moisture, improper grading and drainage as well as wood to earth contact around the home. This is commonly known as Section 2 work. If you are preparing your home for sale and have ordered a pest report it would be useful to make as much of the property as accessible as possible so the inspector can do a thorough job. This would include cleaning up your garage, attic and basement areas and any debris around the exterior walls of the home.

State law does not require a pest report for the sale of real property in California—but many lenders do require a pest report, depending on the type of loan you have and lender you are working with. You can include, as an addendum to the Residential Purchase Agreement (or other agreement), California Association of Realtors (C.A.R.) form – Wood Destroying Pest Inspection and Allocation of Cost Addendum (WPA). This is great form to use when writing an offer to make it clear what you or your lender expects in terms of addressing any wood destroying pest damage. If left unchecked, the costs to repair wood destroying pest damage can run into the thousands of dollars and can be a real deal breaker.

Regardless of how you structure your offer, or what the statutory or lending requirements are, a pest report from a certified, licensed professional should be part of any due diligence process or inspection period and, as a buyer or seller, it is often the first place to start.

Here is a list of local Pest Control and Inspection Services I work with in SLO County.

Real Estate Inspections – Who pays for what?

This is a question that comes up a lot as I guide my clients through the process of buying or selling a home. And, like most answers to many real estate questions, the answer is: “It Depends.” And, while it’s important to keep in mind that “everything is negotiable,” there are regional and customary practices of who pays for what during the course of the sale of a single family home, which is the segment of real estate market that this series will address.

So, let’s put on our old pair of work jeans, roll up our sleeves and take a look at Real Estate Inspections, Due Diligence and Disclosure.

Let’s start with a discussion on potential strategies as a Buyer.  Standard contract language states that “Buyer has 17 days after acceptance to complete all investigations, approve all disclosures, reports and other applicable information which Buyer receives from Seller….” 

This time period can be negotiated, and in some cases, like an REO or Bank Owned Sale, the seller may require an even shorter inspection period. I have also led transactions where I negotiated longer inspection periods for out of town buyers to accommodate their schedules, but standard contract language is 17 days, which can be negotiated and can also affect negotiations. For now, let’s assume that we have an accepted offer, 17 days to perform our due diligence and because time is of the essence and the clock is ticking, we need to get moving.

Now that we have an accepted offer and take it to the agreed upon Escrow and Title Company we can submit the request for a Preliminary Title Report and Natural Hazards Disclosure Report. The Preliminary Title Report traces the history of the property ownership and searches for defects in the title, while the Natural Hazards Disclosure Report can alert you to hazards in that specific area and situations that might require further investigation.

In the case of a single family home sale the 2 most obvious and sometimes required physical inspections are the Wood Destroying Pest Inspection and the Home Inspection.

If the seller has not provided a Wood Destroying Pest Report, that is the first place I would start. In fact, I would recommend that you order it right away. The next inspection that you will want to coordinate is the Home Inspection, it costs around $500, and I recommend that you schedule it at a time when you can be present and engaged and take advantage of the opportunity to learn about the systems and condition of the home you are buying.

It is my professional opinion that you obtain these reports from licensed, reputable companies. If you have to pay for it yourself as a buyer, I think it is money well spent considering the size of the investment.

If the seller does provide any of these certified, professional reports as a course of disclosure, I recommend that you review them carefully, ask any pertinent questions about the report provider and, if necessary, seek a second opinion. I do believe that these costs should be borne by the buyer in most cases to insure that the buyer is getting the quality of inspection and due diligence they expect from the transaction. Remember to inspect what you expect!

There may be other inspections required on the property, especially if the home is on a well system or a septic system. Here is a quick list of some of the other inspections that you may want to consider depending on the property, the disclosures provided by the seller, and the circumstances surrounding the property. In our area it is customary for the seller to provide Septic Clearance (Approximately $700) and a Well & Pump Test (Approx $700) , but like anything else this can be negotiated or made to be part of the closing costs and negotiated into the final sale price. Other necessary inspections might include the following:

• Well and Pump Test (4 hr minimum)
• Water Quality Testing
• Septic Pump, Certification and Leach Field Test
• Sewer Line Inspection
• Percolation Test
• Roof Inspection
• Fireplace Specialist
• Pool & Spa Specialist
• Environmental Testing
• Radon Testing
• HVAC System
• Property Surveys
• Shared road agreements
• Arborists
• Appraisal

As a strategy for the Seller: – Standard contractual language states that “Seller has 7 days after acceptance to deliver to buyer all reports, disclosures and information for which Seller is responsible…” So when an offer is accepted, and because time is of the essence, you will want to be ready with necessary disclosures. In preparing the home for sale, the first thing I would do is clean and de-clutter the home as much as possible and then order a Wood Destroying Pest Inspection from a licensed, certified provider.

The cost for a modest family home Wood Destroying Pest Inspection is approximately $125 and often the first (and least expensive) place to start when looking for problems or repairs you can make before listing the home for sale. Most lenders are going to require a pest inspection so it is a wise move to find out what may come up in the negotiation and get ahead of it while you have options to do so. You will also be required to provide other statutory disclosures regarding the home within this time frame so it is best to be prepared as possible on the Seller end so as not to hold up the Buyer in performing their due diligence and inspections.

Most sellers don’t opt to do this, but you could hire a Professional, Certified Home Inspector yourself to come in and perform a thorough home inspection and point out any needed repairs, which could give you a clear picture of your true selling costs.  The main point is that you get ahead of or be aware of any repairs, or what is known as “deferred maintenance,” so that it doesn’t come up as a surprise once you get an accepted offer on your home and then find out that the furnace needs to be replaced at a cost of $6,000 (example).

It could be worth the approximate costs of $500 to have a home inspector perform an inspection on your home and point out any red flags that he sees on things like switches, valves, doors, windows, hot water heaters and appliances like dishwashers and microwaves. I think that you will find that as you clean and prepare your home for sale, that you will know better than anyone the quirks of the systems of your home and what needs attention and repair. Then be prepared to fix it, or negotiate for it and whatever you do decide, you disclose it.

One final word to home sellers, and this is important: The most critical aspect of any of this, regardless of what you do or don’t do for inspections is disclose what you do know and what you find out. This is where most real estate transaction problems occur and I strongly advise the clients that I represent as sellers to disclose what they know about the home and for the buyers to do their homework on investigating as much as possible about the home.

The inspection period and process can be a stressful and challenging time but it is also your chance to really do your homework and understand what it is that you are buying or selling. Knowledge is power and the more knowledge that you have going into, and throughout the process, the better the decision you can make along the way.