Inspection: Critical Part of Any Escrow Process

Whether you are buying or selling a home, you’ll have to navigate the escrow process. Escrow is a process that many people go through, but don’t fully understand. Yet, it also occurs during the single largest transaction that most people ever make. Because of this, it is often viewed as a process that is stressful, lengthy, and demands attention.

To get through the escrow process to closing, you’ll want to create an escrow checklist. Escrow has requirements for both buyers and sellers. One of the most important of these requirements is the home inspection. Most escrows in California have an inspection contingency that requires an inspection be done, and gives the buyer the ability to walk away from the escrow process. Whether you need to fix your exterior, reach out to insulation companies, or do a proper attic cleaning, it’s critical and helpful to gain a better understanding of the inspection process for both buyers and sellers in a real estate transaction.

What is Escrow?

At its heart, escrow is a process where documents, funds, or other things of value in a real estate transaction transfer between a buyer and seller through a third party. The third-party holds the items of the transaction in trust until any required elements of the transaction take place. Once those conditions have been met, the funds or documents are released which is known as escrow closing.

There are many pitfalls associated with the escrow process, so it is important to go into it with a fairly good understanding of what the process entails and prevent additional money spent. Both buyers and sellers will have requirements that must be met for escrow to close. It may also be helpful to speak with an escrow agent during the process regarding the escrow services.

Buyers will typically be responsible for producing the funds or securing the loan necessary to fund the transaction, as well as making a good faith deposit upfront. Sellers will be required to provide disclosures for certain information during the escrow period, such as who the lender on the current mortgage is, information on property taxes, the homeowner’s associated, and homeowner’s insurance.

The Inspection Contingency

The inspection contingency is an important aspect of nearly any real estate transaction. Except in cases where a property is bank-owned and sold as-is, most real estate transactions will involve an inspection that takes place during the escrow process. Most often, the escrow process will contain an inspection contingency, which allows the buyer to back out of the escrow process if they discover something during the inspection that they don’t like. Put another way, if you are creating an escrow checklist california, a home inspection will almost certainly be on it.

Some homeowners will have a preliminary inspection done before listing their home. This helps them avoid any unpleasant surprises during the escrow process, and can allow them to make any necessary repairs before they enter escrow or prevent escrow holdback.

Just as the escrow process is used to minimize risk in a real estate transaction for both the buyer and seller, the inspection contingency is used to minimize risk to the buyer. It allows them to have a firm understanding of the health of the property, including any structural or mechanical problems that may require future repairs, before the closing of escrow.

There is no strict requirement for who pays for the inspection itself and an escrow inspection california may be paid by either the buyer or seller. Typically the party responsible for arranging the inspection is outlined in escrow instructions given to the third-party in the escrow transaction. However, given the fact that the sale of the home is contingent on both the buyer and seller accepting the final outcome of the inspection, what is found during the process can make or break a real estate deal.

The Inspection Period Broken Down

Here’s how the inspection period usually goes during escrow San Diego, and how you can prepare for it as the buyer or seller. 

In California, there are 17 days to complete any required inspections. The buyer or seller will contract with a professional home inspector, who will go to the property and perform an inspection. 

The inspection itself usually takes between 2-4 hours, and the costs for the inspection will vary. Once the inspection is complete, the inspector will produce a report with their findings. 

Both the buyer and seller should be aware from the outset that the inspection will almost certainly find things that need to be repaired. Whether or not those repairs are made, and who pays for the repairs, comes down to negotiations between the buyer and seller.

Once a problem is found during the inspection period, one of three general outcomes will occur:

  • The buyer asks the seller to lower the purchase cost of the home to reflect the cost of the required repairs.
  • The seller can pay for the repairs themselves.
  • The buyer and seller can negotiate a cash credit at the end of the transaction that allows the buyer to make the necessary repairs.

If one of these three outcomes doesn’t occur then the buyer can nullify the escrow process and walk away from the deal. There is a strong incentive for both the buyer and seller to find agreement about an escrow repair that may be found during the inspection. In most cases, navigating the results of the inspection process to the satisfaction of all parties requires negotiation and compromise.

What do Inspectors Look At?

If you’re selling your home, you’ll probably be wondering exactly what an inspector is going to be looking at. At a broad level, the home inspector will be assessing the core health of the home. This includes looking at the structural integrity of the home, as well as it’s heating, cooling, electrical and plumbing systems. Additionally, inspectors will look at the attic, basement, and foundation, along with the windows, doors, and floors.

The list of things that home inspectors check is fairly long, but it isn’t exhaustive. Home inspectors are looking for big problems with the home. But with that being said, sellers should consider completing easy-to-do repairs that reduce the list of problems on the final inspection that occurs during escrow.

Common Inspection Pitfalls

If you’re a homeowner, you’ll also want to be aware of some of the most common problem areas that can affect a real estate transaction.

  • Damage to the Exterior – You might have dealt with any cracks in your fence or drywall before putting your house up for sale, but if you haven’t they’ll come up during the inspection. 
  • Damaged or Insufficient Insulation – The insulation in your attic can be damaged for any number of reasons, such as a leaky roof or a rodent infestation. You may also have had an insufficient amount of insulation installed. In either case, you’ll want to have this addressed before the escrow process to avoid any hiccups. At Attic Construction, our helpful professionals can assess the health of your current insulation and let you know what it will take to smoothly navigate the inspection process.
  • Messy Attic and Basement – Over time, the unfinished spaces in your home like your attic and basement accumulate debris and junk. Most often, this junk is accompanied by rodents that make these unfinished spaces their home. Before getting your home inspection done, take the time to clean your attic and basement. Better yet, consider having it professionally cleaned by experts like ours at Attic Construction. Our attic cleaning service can breathe new life into your attic, clean up any potential problems before the close of escrow.
  • Damaged HVAC System and Ductwork – One of the key areas that your home inspector will be examining is the health of your HVAC system. You’ll want to ensure your system is functioning and doesn’t have any obvious problems. You’ll also want to verify that your air ducts are clean and in good repair. If any problems with your ducting are found you’ll want to repair them before the inspection.

Final Thoughts

While the escrow process can be intimidating, preparing ahead of time can make the process less stressful. There are a lot of emotions tied up to the process, as real-estate transactions tend to be the largest transaction that most people make. While the escrow process is tedious, the structure of the escrow process was created to help reduce the risk of both the buyer and seller involved in a real estate transaction.

One of the most important components of the escrow process is the inspection contingency. In California, the successful completion of an inspection is a critical threshold for the transaction. Both the buyer and seller must be satisfied with the results of the inspection, otherwise, the deal can be nullified and the buyer can walk away.

Nearly every home inspection finds things that require repair. It is highly recommended that sellers do a preliminary inspection before selling their home so that they can preemptively address any potential issues. Addressing common issues like cleaning out your attic and basement, removing old insulation and installing new insulation, or cleaning and repairing your air ducting, before the final inspection can ensure that your escrow process progresses smoothly and you receive your needed closing documents.

Our professional staff at Attic Construction can help you address any significant issues with your insulation, ducting, or attic before your final inspection. To learn more about our attic services, please contact Attic Construction today.




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