Many homeowners like to celebrate the sale of their home. It can be a feeling of great accomplishment when accepting an offer, especially when it’s full price, after having done so much work. But accepting an offer is just the beginning. The inspection period is where the seller is most vulnerable.
Read on to find out what home sellers need to know about inspections and appraisals in Raleigh.
Due Diligence Period
Real estate contracts contain clauses that stipulate the terms under which a house is bought. These clauses are referred to as contingencies. An inspection contingency is when the buyer wants to ensure that everything works in the home. It makes perfect sense. If you were able to make the single largest purchase of your life, you would want to make sure it wasn’t broken, right? The problems start when the home inspector returns an, often very lengthy, report. If the inspection is not satisfactory it gives the buyer the right to terminate the contract without penalty. This is where the due diligence fee comes in.
The key to successfully navigating this part of the process is to get a good due diligence fee. This is a fee that is paid for the right to inspect the home and terminate if desired. The due diligence fee is credited toward the purchase price or forfeited if the buyer terminates the agreement. The due diligence fee helps the seller determine who their serious buyers are.
As a general rule, we like to see a due diligence fee that equals about 1% of the sales price of the home with a minimum of about $1,000.
Inspections & Repairs
Once the inspector is finished they submit the report to the buyer. The home inspector always returns a list of things to be fixed. Usually, the older the home the longer the list. The buyer will then submit a Due Diligence Request. This is basically a formal request for a given amount of repairs to be done. The seller is then expected to make repairs, by licensed contractors, or concede money at closing. This is all standard practice, but many times this can add up to thousands of dollars in concessions! While there is nothing ‘sneaky’ about this phase of the transaction, sellers need to be prepared for it in advance.
Wake County Home Buyers never asks their sellers to fix anything! If we decide to perform a formal inspection it is just for determining our costs. We never ask our sellers to make repairs.
Appraisal
While the inspection focuses on the condition of the home, the appraisal is concerned with the value of the home. Keep in mind that an appraisal is required to obtain a loan from the bank, and most of your buyers will be getting bank financing. If you are selling a modern home is good condition this is usually a straightforward process. However, if your home has a lot of deferred maintenance, such as faulty heat & air conditioning, roof leaks, structural problems (bowing or sagging of the floors) a bank may not loan on the property.
In the market of recent years, most homes have appraised with no problem. However, with multiple offer situations being more common, the price of homes is being bid over the asking price. Often this will result in the home not appraising for the contract price. Often this will cause the transaction to fall apart.
Termination
If the home does not appraise at the contract price, or if the buyer and seller can not come to an agreement on repairs, the buyer will have the right to terminate the contract. They are entitled to a return of their earnest money, with some exceptions, but they forfeit their due dilligence money.
All the while, the clock keeps ticking and the seller is now paying to hold the property longer than expected, meaning that in reality, they are losing even more of the valuable equity that had been built in the home, and actually making even less on the sale.
Wake County Home Buyers makes real estate transactions easy, we never require our sellers to make any repairs to the property. We don’t require out sellers to clean the home either. We also allow our sellers to discard any unwanted property in the house. They can take what they want and go!
A truly simple, hassle-free sale!
Send us a message or give us a call today to learn more! (919) 473-6885