Escrow inspections & appraisals
Once the contract is signed, the buyer does most of the work for a while. You mostly wait, answer questions and keep the house in the shape it was in when they made the offer. Here is what is going on across the table.
Contingencies
A contingency is a condition written into the contract that lets the buyer back out, usually with their earnest money returned, if the condition is not met by its deadline. In most deals here the buyer has to obtain financing and insurance, gets to review documents such as the preliminary title report and your seller disclosure statement, and gets to inspect the property. The sale gets firmer as each of those is satisfied or waived.
The buyer’s inspections
Most buyers hire a licensed home inspector within the period set in the contract. Some bring in specialists as well. Depending on the property that can mean the roof, heating, chimney, sewer line, well, septic, pests and rot, mold, lead-based paint in an older house, a pool or spa, an arborist, or a boundary survey. A buyer of commercial property may need an environmental assessment or soil testing for their lender. Your part is to make the property easy to get into and to be somewhere else while they work.
Then it usually goes one of three ways. The buyer is satisfied and the contingency comes off. Or they come back asking for repairs, a credit or a lower price. Or, less often, they cancel.
Try not to take a repair request personally. You can agree, offer something different, or say no, and we will go through what each answer is likely to lead to before you give one. This is where a listing agent is most useful. We have read a lot of inspection reports, and we have a fair sense of which items a buyer will walk away over and which are an opening position.
Escrow and title
In Washington the closing is usually handled by an escrow company, often one connected to a title company, rather than by attorneys. The title company researches the recorded history of your property and insures the title the buyer receives. Their preliminary report lists everything recorded against the property, such as your mortgage, other liens, leases, easements and restrictions. Mortgages and liens are generally paid off out of your proceeds so the title is clear by closing, and the buyer’s new loan gets recorded at the same time.
If you know of something unusual in your title, like an old lien that was never released or a boundary question, tell us early. Those problems can usually be fixed, but they take time, and the legal side of them belongs with an attorney.
Loan approval and the appraisal
We suggest favoring buyers who come with a lender’s pre-approval or a written loan commitment. A pre-qualification letter, or no letter at all, tells you much less about whether the loan will happen.
If the buyer is financing, their lender sends a licensed appraiser, hired through a third party, to confirm that the property supports the price. If the appraisal comes in low, the usual choices are for you to lower the price, for the buyer to make up the difference in cash, for the two of you to meet in the middle, or for the deal to end, depending on how the contract was written.
After the contingencies are cleared, what remains is the close of escrow.