Inspections and Service Providers

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You and the Seller Must Agree

Buying a home does not occur in a vacuum, involving only you and the seller. There are all kinds of people and services involved behind the scenes to make it happen. Since some of these services affect both you and the seller, especially the title and escrow company, there will have to be an agreement on which companies you will use for them.  If you are unfamiliar with these service providers, you can get recommendations from us.


Escrow and Settlement

For example, you are going to need an escrow or settlement company to act as an "independent third party" between you and the seller. Without having a third party involved, how do you know that when you fork over the money, you are going to get the deed? This is the type of service provided by escrow and settlement. They will hold your deposit and coordinate much of the activity that goes on during the escrow period.  Since this third party is very important to both you and the seller and both of you will pay fees to this company, it is important to agree on which service to use. Therefore, your choice should be part of the offer. Since you do not buy a home every other week or so, you are probably unfamiliar with companies that provide this service. Your agent will make a recommendation. You have the authority to accept this recommendation and include it in your offer, or make your own choice. Keep in mind that the seller will also have a preference and this may be a point of negotiation in a counter-offer. It has become customary that one side will choose the escrow/settlement agent and one side chooses the title insurance company. Even so, everything in real estate is negotiable.


Title Insurance

Title insurance is important because, by providing you with an Owners Policy, they insure that you have clear title to the property. If there are any problems later, you can always go back to the title insurance company and have them clear it up. Since it is customary for the seller to pay for the owner’s policy, they have an interest in which company is used.  However, you are going to pay a fee to the title insurance company, too. This is for the Lender’s Policy. The lender’s policy insures your mortgage lender that there are no liens or judgments against the property and that the mortgage will be in first position. In other words, should you sell the property or refinance it, their mortgage gets paid first, before any other claims against the property.  The lender’s policy is less expensive than the owner’s policy.  


Title insurance protects the buyer and seller as well as the lender. It is an insurance policy issued by a title insurance company and specifies, among other things, what liens are recorded against the subject property. Public records can be incomplete and contain errors regarding the history of ownership of a property referred to as the chain of title. It's critical a home buyer receives an undisputed, marketable title to the property. Banks will not lend against a property unless the title is clear. Title insurance was developed to attest to the reliability of the chain of title, and compensate people in the event problems arise and someone contests the sale transaction. There are different levels of protection offered by different types of title insurance. Consult your title professional to determine the differences between the types of title insurance available.  


Home Warranty

A home warranty is strongly recomended especially for older homes or homes being purchased as investment properties. The cost for one year of coverage is usually between $350 to $500 and is typically paid by the seller but is negotiable.  If the home is bank owned the bank may refuse to pay for a home warranty unless the buyer uses a specific company.  The seller may also limit the amount of money they will pay for the warranty.  It is important for you to research the coverages prior to completing the purchase so you can add additional coverages.  The home warranty will cover the major 


Appraisal - If you are getting a loan to buy a property the lender will almost always require an appraisal to be prepared. The appraisal will be prepared by a trained, licensed professional and is an opinion of value based on a combination of factors like location, condition, recent sales of similar properties as well as the price of properties currently available for sale. The lender will order the appraisal through an appraisal company. The buyer is typically required to pay for the appraisal prior to the appraisal being completed. In some cases the lender will require two appraisals.  If the house needs repairs the appraiser may need to go back to confirm the repairs have been completed.


Home, Termite and Pest Inspection

Your lender may require a termite and pest inspection and a home inspection. This company not only inspects for termite damage and pest infestations, but also inspects for dry rot and water damage, among other things. The company that performs the inspection is important to you as a buyer, because you want to be sure they do a good job. It is important to the seller because it is customary for the seller to pay for some types of repairs though this is negotiable.  You should also get a home inspection.  All home inspectors in Arizona are required to be licensed.  The inspector will point out any issues that need to be addressed.  Often he or she will suggest that the buyer consult with a specific contractor like a plumber, roofer, electrician or air conditioning specialist for a further evaluation of the issue and cost estimate to repair.  The seller wants to make sure  reputable companies do the inspections as the seller may be asked to pay for repairs.  The seller will have the right to obtain an opinion or estimate from a contractor of their choice.   You should determine which company you want to perform the inspections. If you do not know which company to hire, we can make a recommendation.  


Home Inspection - A home inspection is performed by a trained, licensed professional who will examine the heating, air conditioning, plumbing, electrical, appliances, roof and other items to determine if they are in need of repair. The home inspection is paid for by the buyer and typically takes about four hours depending on the size and age of the house. 


Termite Inspection - A termite inspection is a visual inspection of the readily accessible areas of a home for evidence of wood-destroying insects or organisms. Termites and other pests bore through wood by digesting cellulose material from structural wood like rafters, floor boards and studs which weakens the structure. Subterranean termites are the most common termite in the United States. Though they typically move slowly they can cause thousands of dollars in damage if left untreated. Chemicals or baiting systems are typically used to kill these termites. 


Dry wood termites may require the house to be tented and fumigated with a gas. 


Formosan termites are sometimes called "super termites" due to their ability to cause significant damage in short periods of time. They are the most destructive wood destroying insect due to their large size and aggressive breeding habits. A Formosan termite colony can consist of 350 thousand to 2 million workers. Formosan termites are most commonly found in humid coastal and subtropical regions (i.e. Hawaii, South Carolina, Georgia, Florida and Louisiana). Other wood-destroying pests include carpenter ants, carpenter bees and wood-boring beetles. 


Termite inspectors look for more than just termites. They may also identify water drainage or grading issues, excessive moisture, earth to wood contact and more. Consult with your termite inspector for information on wood destroying pests and more.