Physical Inspection vs. Appraisal Inspection:

If you are a Buyer, our team begins with the physical inspection first, as we do not want you to pay for an appraisal if we are going to cancel the transaction due to any repair request we cannot resolve with the Seller.  For the physical inspector, you can pick your company of choice, or our team can recommend a few to you.  The physical inspector will check the major items at the property for you, including the roof, foundation, electrical, plumbing, and heating.  Our team also recommends for you to obtain a separate sewer camera inspection if you are purchasing a single-family home, as sewer line repairs can be very pricey.  We have been able to negotiate for Sellers to pick up the tab on sewer line repairs, which can be thousands and thousands of dollars.  We also recommend for our Buyers to obtain a termite inspection if we were unable to negotiate for the Seller to obtain a report for us in our initial offer.  Once we obtain all of our inspection reports, we can create a written request for repairs to submit to the Seller.  The Seller can deny all requests, part of the requests, offer a credit to be used towards repairs, or reduce the price.  The Seller cannot cancel the transaction simply because we submitted a request for repairs.  You, as the Buyer, have the unilateral right to cancel the transaction if you are not comfortable proceeding with the transaction after the Seller’s response.                

If you are a Buyer, an appraiser will go out to the property as a part of your loan process.  The appraiser’s job is to value the property, so your lender knows you are not overpaying for the property.  The appraiser will also note any health or safety issues on the report.  Any issues noted by the appraiser are required to be corrected before escrow can close.  The appraiser will always check for smoke detectors, carbon monoxide detectors, make sure the water heater is double strapped and that the heater is working.  Depending on your loan product, an appraiser may call out any holes in walls, missing outlet covers, chipping and peeling paint, etc.  It is important for the real estate team you select to be knowledgeable on your loan product and appraisal requirements.  Our team has been able to get Sellers to cover lender (or appraiser) required repairs on numerous occasions.  It is important for our team to point out any potential required repairs in advance to you prior to writing an offer, as if the Seller will not correct those conditions, you will be responsible to repair any items on the appraiser’s list before closing escrow.  If the appraiser calls out numerous items, and the Seller will not fix them, and you do not feel comfortable proceeding, we can always cancel the transaction and obtain your deposit back, as long as your appraisal contingency is still in place.  Many agents have their Buyers waive the appraisal contingency in multiple offer situations.  This is not a wise idea in most cases, especially if you do not have the funds to complete any potential required repairs, or to gap the appraisal if it comes in low.

As a summary, any repairs called out by the appraiser are required to be completed before escrow can close.  Additional repairs or credits may be negotiated as a result of the physical inspection.  These repairs are not required to be completed to close, so credits can be given in lieu of repairs, or vendors can be issued checks to complete work after the close of escrow if it is not feasible to complete the repairs during the escrow period. 

For any further questions, please contact Danielle Whitney Moore with Team Whitney (Keller Williams Realty L.A. Harbor) at (310) 987-9103.