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.

Land Surveys

The old adage in Real Estate has always been to “buy dirt; they’re not making any more of it.” And while for the most part it’s true, the real issue that comes up from time to time is “which piece of dirt is mine?” That’s where they survey comes into play. If during the course of your due diligence and inspection process you find that there are questions about the physical location of the property and who has rights to what, a survey may be your best course of action to sort things out.

A survey is the technique, art and science of accurately determining the terrestrial position of points and the distances of angles between them. They are commonly used for things such as:

• Maps
• Legal Descriptions
• Boundaries of ownership
• Title insurance
• Building setback and height verification certifications
• Easements
• Land Subdivision
• Lot line adjustment
• Parcel and tract maps
• Public lands, ranches and farms

In most cases, a detailed survey must be performed to strict standards set by The American Land Title Association (ALTA), The American Congress on Surveying and Mapping (ASCM) and the National Society of Professional Surveyors (NSPS). This certified survey is presented by the Professional Licensed Land Surveyor to the client for the intended purposes of the survey. The preliminary title report usually contains a legal description of the property which is based on a survey done at some point in time, most likely when the land was last divided.

The cost of a survey can vary greatly depending on the size and scope of the job.  I have seen surveyors spend days hiking in hills to determine property corners and of course, the more complicated the survey job, the more the cost.

Like any other part of the due diligence process, it pays to ask the right questions upfront. If you think a survey is an important part of your due diligence process then your Broker should guide you to the appropriate resources and providers. When it comes to building structures or establishing agricultural concerns, putting it in the wrong place can be a very expensive mistake to correct. Get it right the first time, every time.

Here is a list of local Land Survey Service Providers that can help.

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.

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.

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.