Check Out The Home In Detail
The due-diligence period.
Once you have a contract for purchase and escrow open (that's when the property is under contract or pending) you need to begin your due diligence. You probably did a little bit of it before, but now it's time to dig into the details to make sure you're getting what you expected.
Since you truly can't get all the information before you submit a contract the contract we use, the one provided by the Arizona Association of Realtor, provides many opportunities and time frames to truly inspect the property and documents and it provides for some lee way if your have to reply on other parties, i.e title report, CC&R's and financing.
The 10 inspection period.
Basically you have 10 days, unless otherwise agreed, to physically inspect the property and also to check out other details. This would be the time you hire and inspector to give the property a check-up. You can get extremely detailed by hiring specialists and sometimes they many be necessary. To give you an example. If you're buying a historic home it would be advisable to inspect the connection to the sewer as this could be a major problem.
This time is also for checking on the schools, zoning, developments and any other thing that may concern you.
The Arizona Association of Realtors has an extensive list of things to inspect and investigate during this time frame (AAR Buyer's Advisory)
At the least you should do a general home inspection which can run from $240 to $600: it's not required, but recommended.
Once this time frame is nearly over you submit any requests for clarification or repair to the seller, via Buyer's Inspection and Sellers Response form (BISR).
You basically have three options in the BISR. Cancel for any 'reasonable reason', request repairs or accept the property as it.
If you cancel you get your earnest money back, if the seller can perform some of the repairs and others, the it will be up to you if you want to continue or not and it the seller refuses to make repairs then you may cancel.
Note: the purpose of the inspection is not to further negotiate the price. You cannot ask the seller to lower the price after you do your inspection, but that may be and option and often is the options the seller proposes.
Note: You have to submit the BISR before your inspection period ends or you, by contract, accept the property.
Other Items To Inspect
Many of these documents, below, are provided early in the contract acceptance process so the time frame for inspection of these documents is usually over before the property inspection ends, but sometimes they may be provided later and in most cases you have 5 days to review the documents even if that 5 days falls after the property inspection period.
- Seller Property Disclosure Statement. This is a statement of knowledge about the property from the seller. By contract the seller is obligated to disclose any material matter about the property and know history. While in some rare instances you will not get this, like in a foreclosed home sale and sometimes in a short sale, most of the the time the document will be provided and you have 5 days to review this.
- Title Report. The title report is exactly what it states and it will signify what the title insurance will and won't cover and it will also divulge any issues that need to be resolved before the transfer of the property. You have 5 days to inspect, approve or disapprove the title report.
- Insurance Claims History. Simple a letter or otherwise called a Clue Report about the history of the insurance on the property. You would want to know if there were any claims that may affect you coverage and rates.
- CC&R's. In a property with a Home Owners Association, of which there are more of these days, and always with condos and the like, the CC&R's dictate the relationship of the property owner to the property and the association with the property and owner. You need to read this carefully because there could be issues affecting your enjoyment of the property. Along with this you will be able to inspect the financial of the Home Owners Association and any related fees.
- Appraisal. All contracts with financing are contingent upon the property appraising for at least the value of the purchase price. If it does not then the buyer may cancel or renegotiate or come in with more money.
- Financing. As written the contract is always contingent on the buyer obtaining financing to the last minute and it for some reason the bank denies the financing them the buyer may cancel, but the reason for the cancellation cannot be caused by the fault of the buyer doing something to jeopardize the loan, like changing lenders, loan types, over spending, changing jobs etc., because then the seller may have a cause to request the earnest money.
- Walk Through. before the closing the buyer and buyers agent will perform a walk through, usually a few days before the close of escrow to make sure the condition of the property did not change and the the seller performed the agreed upon repairs if any.
Please keep in mind this is a general overview and there: then there are the details which are often different for each property and contract. The information above is just an overview.
Phoenix Home Buyer's Guide