Escrow Foundation Inspection

The escrow process is a necessary step to maneuver when buying or selling a home. Despite being a very common process, many people struggle with navigating escrow. Fortunately, the process is not as demanding and stressful as some fear.

By understanding escrow, homeowners and buyers can simplify the process and eliminate potential problems.
To best organize the escrow process, it is necessary to create a checklist outlining the steps needed. Escrow includes specific requirements for buyers and sellers, usually including a mandated home inspection. Therefore, there may be some home repair steps required due to California inspection contingencies in the escrow process.

To summarize, the escrow process includes the following steps which will be explained in more detail:

1. Pre-Escrow: Escrow starts once the seller has accepted the buyer’s offer and the purchase agreement contract has been signed by both parties.
2. Funding Escrow: An earnest money deposit is deposited in the escrow account.
3. Inspection Period: The seller discloses any issues with the home and a thorough inspection is made.
4. Negotiations: Based on what the inspection finds, negotiations are made between buyer and seller.
5. Closing Escrow: The buyer completes all final steps and the loan contingency is removed.

Escrow is a contractual arrangement that involves a neutral third party receiving and disbursing money, property, documents, or things of value in a real estate transaction for both parties involved.

This disbursement depends on prearranged conditions. The third party is tasked with securely holding the transaction items until all elements required in the transaction are satisfied.

An escrow account will be opened once a purchase agreement or contract has been accepted by the seller during a real estate transaction. The escrow agent will collect a small percentage of the sale price as a deposit from the buyer, known as “earnest money,” and the seller will remove the listing from the market. The property will be in escrow until the process is completed and agreed upon by the buyer and seller. Once the conditions have been met, the items are released in an act known as escrow closing. For escrow to close, both the buyer and the seller will need to meet their respective conditions, including an escrow foundation inspection.

An escrow agent can be used to help both buyers and sellers navigate the process. Buyers will be tasked with producing necessary funds or loans to fulfill the transaction, while sellers will need to disclose relevant information during the escrow period. This information includes homeowner’s insurance, property tax information, mortgage lender information, and other important information regarding the home.

The loan contingency will be removed once the buyer completes any necessary final steps. These include completing a home appraisal, having homeowner’s insurance in place, and securing any necessary funding with a lender.

Related: House Bolting Los Angeles 

Importance of Inspection Contingencies

Inspection contingencies are a necessary part of almost all real estate transactions, especially in the state of California. The one expectation would be if the property is bank-owned and sold in its current condition. Escrow foundation inspections are therefore a necessary step in nearly all real estate transactions. Most inspection contingencies will allow the buyer the opportunity to back out of the deal if they discover a negative surprise during the inspection.

Overall, escrow exists to minimize risk for both buyers and sellers in real estate transactions. It provides the buyer with an accurate understanding of the state of the home so that they can be aware of any necessary repair work. It also guarantees that the seller will receive their agreed-upon funds for the property.

Smart sellers opt for a preliminary home inspection before they list their property. That way, the escrow process should be devoid of any major negative surprises. Discovering problems ahead of time can allow sellers to make necessary repairs before they enter escrow so that the process moves faster.

The escrow instructions outlined by the third party will usually state which party will be responsible for fulfilling the home inspection. Keep in mind that both the buyer and the seller will need to accept the findings in the inspection, so this step is very important to both parties.

Breaking Down the Inspection Period

The escrow timeline begins the day after the buyer’s offer or counteroffer is accepted by the seller. Under California law, the standard timeline for inspection completion is 17 days. Sellers usually provide disclosures to the buyer beforehand so that there aren’t any unhappy surprises discovered during the escrow foundation inspection.
Either the buyer or the seller will need to hire a professional home inspector to perform a thorough escrow foundation inspection within this time. When it comes to determining which party should pay for the escrow foundation inspection, there is no set requirement.

Additionally, costs will vary depending on a case to case basis.
On average, the inspection will take between 2 to 4 hours to be completed. After the home and property inspection is finished, the inspector will submit a report providing all findings. The buyer and the seller should both be aware that almost all inspections will uncover areas of the home that require renovation or repair. The two parties will be tasked with negotiating who is responsible for paying for the necessary work the home requires.

Related: Foundation Repair Los Angeles

Three outcomes commonly occur once a problem is found. The options are as follows:

1. The seller can opt to pay for the repairs by themselves.
2. The buyer can request that the seller lower the cost of the property to reflect the necessary repair cost.
3. Cash credit can be negotiated between buyer and seller that will allow the buyer to pay for repairs needed.

What happens if one of these listed outcomes do not occur? In that case, the buyer has the option to nullify the escrow process and exit the deal. If the seller is not willing to pay for repairs or negotiate a deal, the buyer can choose to terminate the real estate transaction. Once escrow closes and the buyer becomes the legal owner, they will be responsible for any problems within the home.

Since abandoning the transaction is not something either party desires, it is important for both buyer and seller to agree to any repair work uncovered by the escrow foundation inspection. Compromise and negotiation are often needed to satisfy both parties.

Related: Foundation Replacement Los Angeles

Fine Points of Inspection

What exactly will the inspector be looking at? In a wider sense, the inspector is tasked with evaluating the general health of the home. This process involves assessing the structural integrity. It also includes evaluating the electrical and plumbing systems, as well as the heating and cooling. Attic, basement, and crawl space areas will also be examined. The foundation will be inspected, with attention paid to the areas around floors, doors, and windows.

Overall, the home inspector will have a long list of things to inspect to determine the health of the home. However, escrow foundation inspections are required to identify any major foundation or drainage related problems. Therefore, the inspection list isn’t full-scale. To reduce the number of problems uncovered, homeowners should consider completing easy repairs before entering the escrow period.

Common Inspection Issues

Homeowners should keep in mind that almost all inspections will reveal some degree of damage. However, there are common problem areas to educate oneself on that can negatively impact real estate transactions. The most common problems include cracked foundations, damaged exteriors, faulty insulation, a messy basement and/or attic space, and damaged HVAC or ductwork.

Before putting your house on the market, it’s wise to handle cracks in the drywall and stucco to give the exterior of the house and property a fresh appearance. The seriousness of a crack depends on the location, size, and the number of cracks, as well as whether the home has other signs of structural issues. A large number of homes have cracks in their foundation and the older a home gets, the more likelihood of cracks appearing. Foundations crack for many reasons including unstable soils, poor drainage, and settling. Cracks may indicate serious structural problems and others may be insignificant.

Cracked foundations can lead to framing issues, roof issues, problems with doors and windows, and even leaks in basement walls. Correction of foundation and structural problems can be costly and occasionally foundation cracks will be a warning sign of other structural issues with a home and this is why it needs to be addressed during escrow inspections. Foundation issues can negatively impact real estate transactions and it is important to address foundation issues before listing your home.

Related: How To Inspect Your Home Foundation

Concluding Thoughts

Though many buyers and sellers can dread the escrow process, proper preparation can reduce stress and lessen the time needed to close the deal. Real estate transactions are almost always significant, and buyers need to be fully aware of the health of the property they are investing in. Likewise, sellers can lessen the stress of escrow by taking steps to improve the health of their home before listing it. Preliminary inspections can save time and hassle in the escrow process and are a highly recommended step for sellers to take.

The escrow process is needed to reduce the risk for both the buyer and the seller. Though it may seem tedious and cumbersome, it is a necessary step needed to ensure a safe and successful real estate transaction. The inspection contingency is crucial to Los Angeles real estate transactions and requires the satisfaction of both buyer and seller.