Buyers Under Contract: The Inspection Period
May 14, 2017 - By Rachel Deckman
You signed the contract, now what? Here is everything you need to know about your next steps in the buying process.
The Inspection Period
Congratulations! You are now officially under contract!
This is the time that is referred to as “under contract, in escrow, or pending” and starting on the day of execution of your purchase contract agreement, Day Zero of the 10 day inspection period begins unless it was otherwise specified for a different amount of time. Hiring a home inspector is not required if you do not want to…however…we highly recommend that you go ahead and get the inspection!
If you choose to hire a home inspector to inspect the physical condition of the home, we recommend that you do so as soon as possible. Doing the inspection sooner rather than later will be beneficial in case further inspections need to be made. The inspector will give you a report of their findings of any issues or conditions with the home that you as the buyer should be aware of. We recommend that you as the buyer are present for your home inspection so that you can physically see what the inspectors point out.
As the buyer, you can choose to cancel your contract anytime during the home inspection period if you find something with the home that you don’t like or something that is of high concern. When you cancel within the home inspection period, you can get your earnest money back. You may also ask the seller to correct items of great concern and we’ll go into that below.
Companies to use for Inspection:
Below are some of the recommended Inspection Companies we have used in the past that we like to refer to our buyers. When it comes to Inspection Companies, you really get what you pay for. By investing more and going with a company you trust, you are more likely to get a more detailed inspection and therefore a more detailed report.
Buyer Inspection Report – Seller Response A.K.A The BINSR
This is a critical milestone – before the end of the tenth day (or however long we decided your inspection period should last) you must send to the seller’s agent the BINSR form. This form has deemed to be one of the more complicated, yet important forms you will encounter when purchasing your home. The BINSR acknowledges that all inspections have been made and that you, as the buyer, are presenting what you would like to be done about your inspection findings. Even if you deny the inspection, you as the buyer have to fill out this form declaring that you declined the inspection. If you choose to go through with inspection, you have the option to accept the property in its current condition and make no repairs. You may also cancel the contract in this form. The last choice would be to elect the seller make improvements of any “disapproved objects”. You will then list all the items you disapprove of and would like corrected.
The key to remember here is that you are targeting the items that are material to you. For example, if the repair item has a direct cost consequence to get it back in working order AND it wasn’t readily known at the time of the viewing of the home. So an underperforming AC unit that was viewed during the winter time and was discovered to be that state by the inspector would fall under the spirit of the BINSR process, however an empty pool with missing equipment would not be because that was clearly visible when viewing and that cost to remedy should be reflected in the offer amount.
After the buyer finishes filling out their part of the contract, the seller has five days to look into the items and respond back. They can either agree to fix the issues presented, reject fixing them, or respond in whatever way they feel necessary. They may elect to fix some things and may reject some items. Sometimes in rare cases, they may offer money at closing towards fixing the issues stated. Often a little negotiation between buyer and seller may happen at this stage to prioritize what items may be more material than others in order to keep the deal still alive.
Once the seller presents their offer to you, you may either elect to cancel the contract entirely and get your earnest money back or accept the seller’s response within the Buyer’s Election.
Once the BINSR report is filled out and agreements are made on repairs, you continue on with escrow towards closing. The appraisal comes next and the last big milestone is getting through underwriting.
If you are ever unsure about something or need clarification, we are always here to help and assist you!
Contact Your Insurance Company
During this period of due diligence be sure to contact your favorite insurance provider and verify the cost and insurability of the home. You’d be surprised, sometimes a strange situation with a home may make it unaffordable to your loan debt-to-income ration and your mortgage provider will require certainly require homeowner’s insurance.
Once the contract is accepted and the inspection period begins, the seller will provide you with a 5-year insurance claims history on the home. If you find anything on the insurance claims history that you don’t like within five days of your agent receiving it, you may cancel the contract and get your earnest money back. Few states give the buyer extra protection of providing the 5-year insurance claims history to buyers so take advantage of it!