The Process Of Buying A House Requires Checks
I’m not trying to scare any homebuyer’s out there who are getting ready to write some checks for a house they expect to own in about thirty days but there are circumstances that buyers need to be aware of especially if cash is tight and doing this more than once is not an option. The process of buying a house does involve writing checks.When you write a check to somebody you expect to get something in return and when it comes to buying a house you’ll have to write a big check if you are paying cash or a fairly big check for the downpayment or closing costs etc. But there are other checks you’ll have to write way before the closing and the harsh reality is that you may end up not buying the house and what do you have for the checks you wrote not a lot. I am writing this post because I spent most of yesterday with a home inspector, a septic inspector and a termite inspector who were doing inspections on a 105 year old house that my clients are buying, needless to say we found some issues and while I believe we’ll be able to work out with the seller.
While it hurts to write a check for a home inspection that shows up major problems the money spent on the inspection will pale in comparison to the amount of money you could be spending had you bought the house without knowing what was wrong. If the seller won’t fix them you can walk away, it’s not common but be aware that buying a home comes with some expense and some risk. Do your due diligence and employ all the resources available to you. That starts with the first or second time you are in the house, do the floors move, is there mold on the walls, cracks in the foundation, maybe this isn’t the one.
Home Inspector Gets A Check
The home inspector gets paid either up front or right after they get done with the inspection, some inspectors will allow you to pay at closing, but that is a risk most inspectors don’t want to take. If the deal falls through some people might be reluctant to pay for an inspection on a house they won’t own. The job of the home inspector is to find any defects or problems with the home, so you are paying for the knowledge that the house is either in great condition or at least you know what’s wrong and can ask the seller to fix the problems, either way that is money well spent. Sometimes the home inspector finds a major issue that just kills the deal for the buyer it could be a structural issue or mold or water damage or Radon and regardless of what the seller will do that buyer is done. Often times it’s not just one problem with a house but a number of fairly big issues that combined are too much for the buyer or too expensive for the seller to fix. Examples of these could be the HVAC unit, the roof, major plumbing or electrical problems. What does a home inspection cost? It depends on where you live, the size and age of the property but a ballpark number for an average size home is between $350-$500.
Termite Inspector Gets A Check
Termites can eat a house in a remarkable short time if the conditions are right and there are no preventive measures in place. Most of the time the damage is contained to a small portion of the house, not always and depending on what they have been munching on it could be a costly and time consuming fix. If you pay for a termite inspection and the inspector finds termites that’s one thing but they will also note any damage the termites have caused and this is commonly in the crawl space or where the house meets the ground and replacing these pieces can be costly. All wood used today and going back a while is treated to deter insects like termites but they can get past it to the untreated wood especially if there is stuff stored in the crawl space. A termite inspection typically costs the range of $50-$75.
The homes below are all 100 plus years old for sale in Wake and Johnston County.
Septic Inspector Gets A Check
If you’re buying a house on county or city sewer then skip this part because you won’t be having a septic inspection done. Believe it or not, not every homeowner knows if they have a septic tank and a lot of people who own a septic tank have no clue where it is, how to take care of it, what not to put in it and have never had it pumped or inspected. If you’re still reading then you’re buying a house with a septic system. This is a seperate inspection form the home inspector and while they are only looking at one system in the house it is equally as important as it can be very expensive to fix problems with a septic system.
With a 100 plus year old house you can bet there were issues with the septic and age is a factor when it comes to problems with septic systems but not solely and new homes can develop problems just as easily, if the unit was installed incorrectly or if the ground gets water logged, improper use and neglect can also cause problems. Most of the time they work fine and I’ve seen them go untouched for decades and they work fine, I’ve also seen them less than five years old and have problems. Instead of explaining how a septic system works and what can go wrong here is a video I made with Bill Hardee of Hardee’s Septic Tank Service who is an expert in this field. A septic inspection can cost in the range of $300-$500.
Home Owner Gets A Check
Here in North Carolina we have in our Offer to Purchase and Contract a Due Diligence Fee which is an amount of money (if any) that is paid to the seller directly to allow the buyer to conduct their Due Diligence. This is in addition the the Earnest Money Deposit which is common in most contracts. The Due Diligence Period is the time the buyer has to conduct their inspections, make sure their loan is approved and gives them the opportunity to terminate the contract for any reason or in the buyer’s sole discretion that they do not wish to proceed. The way the Due Diligence Fee works is it gives the buyer a period of time usually around three weeks (the time is negotiated) to conduct any investigators to do with the property these can include…
- Loan Approval
- Review of Documents
- Flood Hazard
- Zoning And Government Regulations
- Utilities And Access
- Streets and Roads
- Fuel tanks
An important point that is often over looked is that at 5 p.m. on the Due Diligent Date if the buyer has requested that the sellers make any repairs then the seller must have agreed to the repairs in writing by this time, it is not enough just to send a repair request by this time. Repairs are often negotiated between the buyer and seller so it is important to allow enough time to have any repair items agreed to otherwise the buyer must be prepared to either terminate the contract or proceed to closing. If the buyer decides to terminate the contract for whatever reason before 5 p.m. they are entitled to their Earnest Money Deposit back but the check for the Due Diligence Fee should have been cashed.
There are circumstances where if the seller in in breach of the contract that the buyer would be entitled to the Due Diligence Fee back. If you suspect that the home you are buying might have serious issues or you won’t be able to get your loan approved by the date then it is in your best interest to negotiate a lower amount for the Due Diligence Fee. Due Diligence amounts can vary greatly depending on the sale price of the home, the condition of the home, the desirability of the home so check with your agent to see what a fair amount would brand what the market in your area is getting. It starts at zero and as an example for a $250,000 home a due diligence amount would be in the range of $200-$300. Whatever the amount is it is applied to the sale price if you buy the house.
Appraiser Gets A Check
It’s not very common for buyers to spend money on an appraisal and not buy a house but it can happen and you need to be aware of how to avoid it.When you apply for a mortgage the bank wants to know that the amount they are lending you is what the house is worth or at least what they would be able to sell it for, so they order an appraisal. The mortgage broker you are using collects the check or credit card from you to pay the appraiser, it is at this time you need to discuss when the appraiser will be sent out. If you suspect the house might have issues with the home inspection you’ll want to have your inspections done before you spend the money on an appraisal.
If the appraisal comes back below the agreed contract price then you as the buyer have to decide if you want to proceed by asking the seller to reduce the sales price to the appraised value. This is common because most people get loans to buy houses and if it won’t appraise they won’t be able to sell it. In rare cases when the seller refuses to lower the price and the buyer really wants the house they end up bringing a check to the table to make up the difference because the bank will only lend you what the house appraised for.
If the seller refuses to lower the price and you the buyer cannot bring the difference to the closing then you paid for an appraisal on a house you won’t own. If you’re using a Realtor they will have pulled comps to make sure the sale price is in line with other similar homes in the area.If the mortgage broker collects the appraisal fee up front and the deal falls through before the appraiser has been sent out you are entitled to a refund. An Appraisal costs between $300-$400.
Get Out Your Checkbook But Only When You’re Sure This Is The One.
So if you’re a homebuyer just be aware that buying a house comes with costs that you may incur without buying a home. Most of them are actually saving you a ton of money in expensive repairs if you buy a house with problems. Often the seller realizes they have to fix major issues with their home in order to sell it. If it’s an older home,an estate sale, a foreclosure you might be buying it as is so you need to know what you’re getting. These are five checks you could write when buying a house and never buy the house but more than likely you’ll buy it and love it.
Here is a great resource from Matt Minor in Durham about How to Buy An Older Home
This Article from Andrew Fortune in Colorado highlights the 10 Items To Check Before Falling In Love With A House
How To Sell A Home As Is by Kyle Hiscock in Rochester, NY is for sellers but buyers can learn a lot by reading it.
Bill Gassett an expert real estate agent in Massachusetts explains Breaking a Real Estate Contract
Some excellent advise from Ryan Fitzgerald in Raleigh, NC about Avoiding Common Mistakes When Buying A Home
Or Karen Highland gets us inside the mind of a seller and a buyer in her post Update or Sell As Is
If I can help you with your home purchase or if you have any questions give David a call at 919-601-2268 or email firstname.lastname@example.org