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Escrow Inspections and Appraisals

The Process, Step-by-Step

The Initial Agreement and Deposit.

An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.

Some important tips to keep in mind to streamline reaching an initial agreement :

  • Keep written records of everything. For the sake of clarity, it is extremely useful to transcribe all verbal agreements including counter-offers and addendums and to convert them into written agreements to be signed by both parties. Your agent should assist you with this and keep track of all details.
  • Stick to the schedule. Now that you have made your offer, you and the seller will be given a timeline to mark every stage in the closing process. Meeting requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of the contract. Your agent will keep you constantly updated, so you will always be prepared for the next step.

The Closing Agent.

You will work with a title company or an attorney as a closing agent. The closing agent will hold your deposit in escrow and will research the complete recorded history of the property. This is done to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.

How to Hold Title.

You may wish to consult an attorney or tax advisor on the best way to hold title. Your real estate agent can point you in this direction if needed. Different methods of holding title have different legal, estate, and tax implications.


Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the contract’s agreed upon time frame . You may elect to have multiple inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in specific areas (eg. roof, HVAC, structure). We can recommend different inspectors based on your needs. Also, if you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution.

Depending on the outcome of these inspections, one of two things may happen:

1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or

2. After reviewing the property and the papers, you request a renegotiation of the terms of contract (usually the price).

Appraisal and Lending.

It is imperative that you keep in close communication with your lender, who will let you know when additional information or documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine its value for the lending institution. This is done via a third party so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. After the appraisal and when you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.

Association Approval.

If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Make sure that the association’s application documents and processing fees are submitted appropriately and on time. If you are required to meet with the association for approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval be brought to the closing, so that it can be recorded with the deed in the county public records.

Property Insurance.

If you are obtaining a loan, you will be required by your lender to purchase a certain amount of insurance on the property. Insured value will depend on the lending institution and the purchase price of the property, but you can look into different options for homeowners insurance to find the best price. You can also save money with these tips:

  • Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
  • Ask your insurance agent about discounts. You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire-retardant roofing materials. Other discounts may exist for seniors or long-term customers.
  • Insure your house, but not the land under it. In the event of a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.

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