First and foremost, I feel compelled to state that this post is strictly my personal opinions based on my own professional experiences with my own borrowers here in Los Angeles & Ventura counties. As an NMLS licensed Mortgage Loan Originator (MLO) as well as a CA DRE licensed agent, it's important that anyone from outside of CA reading this understands that in their area or state, the rules, regulations and codes may differ from the ones here in Los Angeles & Ventura counties.
I’ve recently come across a few posts that got me to thinking of my own borrowers here in Los Angeles & Ventura counties and about a couple of the trials and tribulations they have in trying to purchase a home here. While there are numerous issues for buyers when searching for a home to buy here, one of the most challenging issues are property conditions and how the condition of a property can actually disqualify a property for financing.
In Permits? We Don't Need No Stinkin' Permits! by Jay Markanich, Jay (a VA state home inspector) outlines the issues with a recent property that he inspected that had some serious construction issues with an unpermitted addition. Jay discusses not only the building code standards that this homeowner violated in the way that the addition was constructed but he points out the safety hazards as well as the insurance coverage issues that this unpermitted work created.
For anyone considering the purchase of a home, I simply can’t stress enough, the importance of conducting some absolutely vital due diligence before you proceed with that property that you have just contracted to purchase, starting with a home inspection.
Having that home inspected by a certified and licensed home inspector is just the first step in conducting the necessary due diligence before buying a home. For only a few hundred dollars, a good home inspector can ultimately save you thousands of dollars by discovering and assessing any issues with the home that may or may not be a problem now or later.
I have countless stories of how so many of my borrowers have avoided buying absolute money pits by having the property they wanted to purchase inspected during the inspection period. Furthermore, a good inspection can also identify any minor issues that a prospective home buyer may want to take care of after the close of escrow.
Having said this though, I am not proposing that buyers use inspection reports as a means to renegotiate their purchase contract or to create long repair requests demanding the seller repair every minute thing on the report. That is just silly and not that smart in this market where competition is fierce for halfway decent properties in relatively good condition.
While I can’t speak for other markets, here in Los Angeles & Ventura counties, halfway decent properties, with no major issues (key word here being major), are in high demand. If you push a seller to repair minor issues that have no major health and safety issues and/or no building code violations, then you could very well find yourself cancelled out of the game so that the seller can just take one of those other offers that they got during the multiple offer negotiations.
However, any major issues that were discovered during the inspection period need to be brought to the sellers and their listing agents attention, especially if those property conditions were not previously disclosed on the CA seller’s transfer disclosure statement (TDS) or the CA agents visual inspection disclosure statement (AVID). Here in CA, these are required disclosures for all property sales and they must be as accurate as possible.
Furthermore, here in CA, inspection reports belong to the property and not the parties so providing a copy of the inspection report both the seller and their listing agent will allow them to honestly and accurately disclose any property conditions that they had not previously disclosed or knew about.
Getting an independent home inspection is only the first step in buyers conducting their own due diligence during the inspection period. On that note, I hope you stay tuned for my next installment, where I will discuss other due diligence matters that buyers need to be doing on the property they are contracted to purchase, especially here in Los Angeles & Ventura counties. For some properties, this can actually be a deal breaker in closing escrow.
Buying a home is one of the most important decisions someone can make. Today’s real estate market can be really scary, which is why it’s important to get as much information as possible before you start your search.
The home buying process is not a simple process and it's because it can get really complicated and convoluted, that borrowers today need to be working with professionals that will work in your best interests. If you have any questions and/or concerns, please feel free to contact me, Donne Knudsen at C2 Financial Corp., at donne4loans@earthlink.net or 805.2069123 and I will be happy to assist you in any way I can.
ATTENTION PROSPECTIVE HOME BUYERS: Do Your Due Diligence BEFORE You Close Escrow!!! - Part 2
Photos courtesy of flickr: vahm54 jledme mustipher giacomomacis
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Donne Knudsen
Realtor® - CalState Realty Services
DRE#: 01364050 / NMLS#: 249822
805.2069123
Serving low-medium income individuals and families as well as first time buyers with both their real estate as well as their mortgage needs including down payment assistance
Los Angeles County -- Ventura County
© 2010 - All Rights Reserved
Yep, due diligence. But the buyer has to take an active role. One simple call to the village for permits & the matter is handled quickly. Always get an inspection NO MATTER WHAT, no matter how fast the market is. It also gives the inspector a clue as to what concerns you have with the house (addition by whom?). There are so many components in a house, most people feel they can do it themselves when they really can't or shouldn't.
Donne, well said. We also recommend that the Inspector Should pull the Permits and than there are no questions later since he is the best person to explain to the buyers what those Permits actually say.
Donne, I appreciate your "disclaimer" regarding your venue specific experience. Inspections are critical. I tell buyers before we even get started they will need to get inspections and I lay out the estimated costs. I tell Sellers - there is no such thing as over-disclosing. If you know about it - disclose it. Looking forward to your next post.
Hi Donne,
Due - Dilligence is just common sense, and the challenge arises when any party to the deal does not do their respective home work and trouble arrises, we go back to the contract and refer to it for guidance, and not doing what the contract give either party direction to do, always becomes the issue.
Apparently a previous offerer had "beat them up" after the inspection, so their response was to not allow inspections. I contemplated how to proceed, and thought that two offers submitted together was the way to go.
One offer would have an inspection and would be reasonably close to their asking price. The other offer was going to be about $50,000 less, but with no inspection. I can get nearly everything fixed for that discount. Ultimately, I decided against making any offer, and the house has still not sold.
Buyers ... heck anybody involved in a real estate transaction these days, better have done their due diligence .. or their homework prior to signing a contract and closing on a loan. Education is SO key. It's never been more important. It's up to the professionals in any transaction to reinforce this. But we can't do everything for our clients .. and we can't care more than they do. They have to be involved. That means work on their part. If they aren't prepared to offer that up ... probably best not to start. GREAT blog, Donne ...but it seems I'm always saying that ...
Gene
Amen, Donne! Wise counsel here! Looking forward to the next installment!
Definitely get an Inspection. It's the BEST 300.00 a buyer WILL ever spend.
I always recommend a good home inspector. I do remind that buyers, we are looking for things beyond normal wear and tear... and those things that are a safety issue..... One problem I have with the disclosures, is that they are often not forthcoming and tell only part of the story.....
Lyn - I couldn't agree more that buyers have to take an active role in doing their due diligence. So often I see borrowers failing this part of the process and then blaming it on everyone else in the transaction for not doing our jobs. SERIOUSLY!!!
Endre - I agree that it is so much more helpful when inspectors pull the permits. However, I'm told that some inspectors decline this request. I find Ventura county inspectors are more helpful than LA county inspectors.
Kathleen - Because we tend to do things differently here in CA, I felt the disclaimer was warranted. I'm glad to hear that you're one of the Realtors that advises their sellers to disclose everything. Some listings agents don't do that. If a buyer provides you with the inspection report with conditions that weren't previously disclosed, do you change your TDS and AVID? Just curious.
Peter & Linda - I agree that inspection reports on decent properties with no major issues shouldn't be used as weapons by buyers to renegotiate the purchase contract. However, major issues that were not previously disclosed need to be addressed and sometimes that may result in tweaking the terms and conditions a little.
Mel & Mel - WOW!!! What a story! I personally have never heard of a seller denying a buyer to do an inspection! If I ever had, I would be advising my borrower to not walk away but run as fast as they could from a property where the sellers refused an inspection. SERIOUSLY???
Thx for stopping by everyone; I really appreciate it. Have a good night everyone and a wonderful weekend too! :)
Gene - Hey cutie patootie! LOL Just love the new pics of that little sweetie pie. Anywho, I couldn't agree more that buyers need to take an active part in doing their due diligence. My next one will more education on how they can conduct their own due diligence. I really feel that many borrowers have no problem doing this, they just need directions and guidance.
Ed - Thx I appreciate the support. I should have the next one up sometime tomorrow.
Robert - Isn't that the truth! The best money most buyers can spend to weed out the money pits.
Joan - I agree that buyers making silly requests for minor items is just nonsense but major issues need to be addressed especially if they were not previously disclosed. Don't even get me started on sellers and their listing agents who are not honestly and accurately disclosing the true nature and condition of the property.
Thx for stopping by everyone; I really appreciate it. Have a good night everyone and a wonderful weekend too! :)
Donne:
A property inspection is the most important inspection a buyer can get. Termite inspections are important to, but in my area the Seller pays for that inspection. Sellers also pay for sewer lateral(the connection between the houses sewer and the cities' sewer pipes and automatic gas shut off valve. In California the sellers pays for water heater strapping, natural hazard disclosure inspection, smoke detectors and now CO detectors. Of course all of these disclosures can be negotiated.
A Home Inspection is so important that i tell my clients if they can't afford the inspection they certainly can't afford the home. Agree, it is the first step in due diligence but it is the step that begins the journey.
Hi Donne, really great post on a very important topic. Congrats on the feature. Getting a good home inspection, like you say, is critical, must do!
I like what Marge says: "if you can't afford a home inspection you can't afford to buy a home"...this is so true. On my agent disclosure I always recommend that the buyer to have a professional home inspection....I some times even insist on it....it's only for the protection of the buyer and I wish more buyers would understand this.
I cannot imagine representing a buyer and them not performing a home inspection. I wish sometimes we could pick the inspector for the buyer. I had a buyer choose their own inspector and they delivered a 5 page Word document for their findings and most of the page ware just large size pictures. Thankfully, the house was in fairly good condition. Still, if it were up to me I would have picked a more thorough inspector. It's THAT important.
We've been noticing a lot more problems in closings here in Florida as well. We are now seriously recommending attorneys to represent all REO and short sale buyers where the seller is handling the title.
Donne, California buyers can count on you to explain it in REAL language that they can understand. The fact that you took the time to write this post to buyers that are wanting to purchase a home in California speaks volumes to your professionalism and caring attitude toward not only your job but your clients. So well written and well said. Even though I'm not a California buyer, may I thank you for those California home buyers?
Hi Donne,
Great post with a lot of good information.
I always recommend to my buyers that they have there own real estate attorney in any closing to make
sure that there are no surprises.
Donne a homebuyer canNOT be so in love with a home that they are willing to overlook potentially dangerous and/or costly issues.
Congratulations on another feature! I would take a used car I was thinking of purchasing to a mechanic. The same principle applies here. Don't end up with a home that you thought was great, and it turns out to be a money pit.
Evelyn - WOW!!! It sounds like you work with some great sellers up north there. Down here, equity sellers try and get away with paying as little as possible if anything at all and bank sellers also rarely pay for anything either. As for a lack of disclosures being negotiated? SERIOUSLY??? This is never a good idea and I would actually think illegal here in CA.
Marge - AMEN!!! If you can't afford a few hundred dollars to check out the home, you are certainly not going to be able to possibly pay the thousands you may end up paying after the close of escrow for some major issue.
Sandy - This should be a no-brainer for any purchase transaction. I even tell my new construction borrowers to get inspections and lucky thing too because construction crews are infamous for screwing things up.
Aida - Great practice to have for your buyers. Once again, this should be a no-brainer for any home purchase.
Valarie - Yeah, I know, sometimes we just want to bonk our buyers in the head for the dumb stuff they do - like letting some unlicensed. DIYer relative check their house out. GOOD GRIEF!!! Don't even get me started on that topic. Unfortunately, we can't do everything for them though.
Thx for stopping by everyone; I really appreciate it. Have a good day everyone and a wonderful weekend too! :)
Gabe - Being an escrow state that uses escrow officers for closing, I can't even imagine what an attorney has to do to manage a closing.
Judi - Yeah, sometimes, we do things a little differently out here on the left coast. The problem is that so many of the REOs are often handled by out of state bank sellers as well as out of area listing agents who are truly nothing more than REO mills and are basically MIA throughout the entire transaction. This makes things a little more challenging on these transactions.
James - CA is an escrow state so we don't use attorneys for closing; we use escrow officers. Having said that though, here in CA, buyers are supposed to be allowed to choose their own settlement services (title, escrow, pest, etc...) but rarely get to because sellers almost always dictate the settlement services. This can be a reall issues, especially with REOs who often use out of area (some even out of state) REO escrow mills who are absolutely horrible to work with.
Charita - AMEN!!! I like to ask them if they would still feel the same way about the property if they discovered some major and costly issue. That one question can really put things into perspective.
Ron - EXACTLY!!! Especially around here and especially with REOs where there are absolutely zero disclosures - EVER!!!
Thx for stopping by everyone; I really appreciate it. Have a good day everyone and a great weekend too! :)
A Home inspection is very important. Very good post from someone who is not a Home Inspector.
If we agents do our job, many problems would never exist.
Good morning Donne,
Great points...Seller's should disclose, disclose, disclose and Buyer's should inspect, verify, do all due diligence.
Donne,
Excellent point. I always start with buyers by explaining the steps of a purchase. Besides just actually finding the house they want to purchase, getting financing - having a professional inspection is a key step. In a majority of cases we find minor items.
Sometimes we find bigger issues and I am in full support of my folks walking away (running really) as they can in our GA due diligence option period. Representing buyers I want them to get an excellent home or if it's one that needs repairs - issues they KNOW ABOUT ahead of time while they can make a decision to still buy or walk....
All the best, Michelle
Gene - As an MLO, I actually do NOT want to see the home inspection report - EVER!!! Furthermore, I don't even want to see any repair requests on the purchase contract either. I am a firm believer that inspection issues as well as repair items need to be completely separate from the purchase contract.
Unfortunately though, I have seen way too many times where the the home inspection report can derail the loan transaction from the get-go. Many of my borrowers will refuse to grant me authorization to order the appraisal until they work out any inspection issues or repair requests.
Lenn - LOL Yeah, I agree. While I have no problem assisting my borrowers in doing their due diligence, I fully expect them to get involved in the process, whether they do it themselves or hire someone else to do it. The fact is that it must be done, every single time. Personally, I feel this process is actually a part of responsible homeownership - knowing as much as you can about the property you are contracted to purchase. JMHO
Lisa - AMEN!!! I couldn't agree more! We all have a job to do and as long as we are all doing our jobs, we can probably resolve just about any problem that arises. HOPEFULLY!!! :)
Michelle - I agree that buyers need to know as much as they can about the property they are purchasing. However, I am not a fan of buyers making mountains out of molehills either. I am of the attitude that no home is perfect and that all homes will probably need some minor repairs and quite frankly, that's part of homeownership.
Furthermore, any buyer who isn't willing to overlook a few minor repairs in order to proceed with purchase an otherwise decent property probably isn't prepared to be a homeowner at least not around here. JMHO
Thx for stopping by folks; I really appreciate it. Have a good day everyone and a great week too! :)