From Home Inspection to Moving In
By Allison Trimble
Last month I outlined the initial steps to take when buying a horse property. First you assemble your team of Realtor and lender, then find the property, make an offer, and deposit earnest money. In this article I describe the process from home inspection to bringing your horses to their new home.
A third-party home inspector does a non-invasive inspection of the home and provides a report that outlines potential issues. It’s not unusual to have findings that suggest further inspection by a professional in a certain field, such as a licensed roofer or electrician.
Most home inspections are on the primary residence and don’t include outbuildings unless specifically requested. Barns, indoor arenas, and shops should be checked for structural soundness and particularly for electrical safety, but that is sometimes better accomplished by a contractor.
The buyer may 1) accept the inspection as-is and move to closing, 2) request specific repairs or credits based on the findings of the home inspection, or 3) reject the findings and terminate the contract to purchase.
If repairs or credits are requested, the seller may 1) agree and move forward, 2) counter-offer other terms, or 3) not agree to any of the requests. In the event of a counter offer or refusal of requests, the buyer may back out of the contract, but the seller may not.
This is one of the more stressful parts of the transaction, as it’s where parties have the biggest difference in perspective. Stick to health and safety concerns and issues that can result in significant expense. This is the last point where a buyer can back out with cold feet and retain their earnest money.
In Washington State it’s customary for the seller to cover the expense of title insurance, which is a policy that insures against potential undisclosed clouds on the title. The title company sends a report that discloses all documents recorded against the property. They will insure against any claim on the title that was not disclosed in this report.
This includes plat maps, the deed, liens against the property, land use agreements, oil and mineral rights, easements, home owner’s association bylaws, and other potential restrictions against the property. Properties that include acreage often have a greater potential for unexpected underlying documents. There’s usually a period of time in which the buyer can back out based on the contents of the title report.
An appraisal is ordered by the bank and is an opinion of value provided by a licensed third-party appraiser. The buyer usually is responsible for the cost.
The appraiser takes into consideration the subject property and compares and adjusts the value based on the sales of similar properties within the area. The appraiser can also call out factors that are not in compliance with the type of loan and can require them addressed.
Most often appraisal values come in close to the agreed upon purchase price, but trouble comes if the appraiser gives a valuation of the property that is below the agreed upon price. The bank will not loan on an amount above the appraisal value, so in this event either the buyer pays the difference, or the seller comes down on price or the deal falls apart.
The appraisal is the last major step before closing.
Prior to Closing
Throughout this process, the lender has requested information to finalize the loan. The loan package must have everything required, and then be reviewed and approved by an underwriter. I tell clients to treat this like going through customs; simply provide what is asked for in a timely manner, even if it doesn’t seem necessary. Lenders must follow regulations regarding income, down-payment funds, debt-to-income ratio, and other related items. Once final approval is given, a closing disclosure (CD) is presented for acceptance. This outlines the terms of the loan, as well as cash needed to close.
From the time the CD is signed, there’s a mandatory three-day waiting period that must be observed. This can be surprising to buyers, but it’s there to ensure that the buyer is comfortable with the terms and conditions of the loan. This was instituted to prevent buyers being surprised by the documents at the closing table and feeling pressure to close.
In this waiting period it is advisable to do a final walkthrough of the property to make sure all inspection items were completed, and that the house is cleaned and in acceptable condition for the buyer to take possession.
On closing day, the buyer signs loan documents, the deed, and other documents pertaining to the purchase. This typically takes about an hour. In Washington, possession is at 9 p.m. on the day of recording, unless otherwise agreed upon. Now it’s time to breathe a sigh of relief and move those ponies into their new home!