Protection In The Buying Process
Fire And Hazard Insurance
Most lenders require a homebuyer to provide a one-year paid receipt at settlement for a fire and hazard insurance policy, often called homeowner’s insurance. These policies are available from several leading insurance companies through Long & Foster Insurance Agency, Inc., or the insurance company of your choice. Fire and hazard insurance provides protection for fire and other perils to your home and its contents.
What To Expect From A Home Inspector
What can homebuyers expect from a home inspector — besides a bill for $300 and up (depending on the size of property and/or complexity of the inspector’s report)?
First of all, require proof of membership in the American Society of Home Inspectors. Next, expect a quickly-delivered (one or two-day) written report.
Expect practical returns. While you can see for yourself many flaws in a house, the practiced eye of a professional inspector can probably spot more, especially in areas not easily accessible to a homebuyer. Specific information could even reduce the price of a house if the seller will agree the price has not already been discounted for defects.
- Serious problems (heating, roofing, plumbing)
- Medium problems (insulation, paint)
- Minor problems (electrical outlets, kitchen sink)
If no serious problems are found, inspection can pay off indirectly in assurance that you are making a sound investment.
Many states now require that sellers provide buyers with either a residential property disclosure or disclaimer statement.
Title insurance provides protection in the event any of a number of past actions threaten the title to your property. Most lenders will require title insurance to protect their interests. Be sure to ask about an “owner’s” policy as well, to protect your title. You may save money if you buy owner’s title insurance at the same time as mortgage title insurance, rather than buying it separately later.
As a homebuyer, you may be able to save money with a “re-issue rate” for title insurance, if the property changed hands within the last several years. The title insurance may allow a lower “re-issue rate” premium because the recent title search is still valid. Consult your title attorney and insurance company.
After Loan Approval
After the lender approves the mortgage, the buyer will receive a “loan commitment letter” stating the mortgage amount, interest rate, and length of loan term. The buyer should check it carefully, and return a signed copy to the lender or follow other specific instructions.
Next, the selling and listing brokers will coordinate a settlement date. You should be sent a letter confirming the date, place, time, and a checklist of everything you, as the homebuyer, need to bring.
The purpose of the walk-through inspection on the day of settlement or several days prior to settlement is to determine if all conditions in the contract are satisfied. The time for the buyer to inspect and note defects for correction by the seller is during the contract negotiations and prior to signing the sales agreement. Repair or replacement items should be noted in the contract or contingent on a house inspection, otherwise, most resale homes are sold in “as is” condition.
It is up to the buyer to perform the walk-through inspection, not the seller, who may or may not be present. The buyer should be accompanied by the selling agent. The home seller should be sure utilities are on so that equipment can be operated.
Room By Room
The buyer should try all lights and switches; turn all faucets on and off, run shower, flush toilets; turn on the furnace and central air conditioning (in the off-season, buyer should hire a professional to certify proper functioning of both heating and air conditioning); test all stove burners, oven at bake and broil; run some ice cubes through disposal to test blades; run dishwasher, washer, dryer through complete cycles; open and close all windows and doors. In short, try everything, even keys and the fireplace flue.
All deficiencies should be noted, and funds may be withheld from the home seller by the settlement attorney for repairs, if seller does not correct problems prior to settlement. The selling broker will coordinate with the listing broker and seller to make repairs before settlement, if possible. Upon receipt of bills and notification that repairs are complete, the attorney will release balance of funds to the seller, if money is escrowed for needed repairs.