Do Not Make the Underwriter ask for Your Home Inspection

Just because buyers obtain a home inspection is no reason to send it to the lender.

I don’t go into my office very often because I work from a virtual and mobile office. But I do make a point of going to my office at least once a week to attend our weekly office meetings. That’s because I pick up new information and can share stuff with my fellow agents. I learned something interesting a few yeas ago that affect agents, sellers and buyers everywhere in the country, not just in Sacramento.

Most agents know that if their seller is not willing to pay for a pest completion, they probably should not include the requirement to pay for a pest report in a contract that is contingent upon financing. That’s because the underwriter will ask to see the pest report and will call for a completion certificate if work is required. It’s one of the reasons why some listing agents worry about a buyer doing a VA loan.

In our California purchase contracts published by C.A.R., there is a place to insert the fact that the buyer is planning to obtain a home inspection. Yup, you know where I’m going with this one. Sure enough, underwriters pick this up and often demand to see the home inspection. Not only do underwriters ask to see the home inspection but the underwriter, as a condition of loan approval, can require that the parties fix a laundry list of defects.

Even though your buyer’s agent might not include the home inspection in the purchase contract, if the seller or listing agent checks the box on the TDS that the home inspection is part of the disclosures, the lender can demand to see it.

I don’t know about every state, but in California a buyer always has the right to perform inspections pursuant to the contract and paragraph 14B1. It might not be a good idea to spell out specifically what those inspections are in the purchase contract. Because no home is perfect. Every home has defects. And if you have to hand over that list of defects to an underwriter, the seller or the buyer might be required to repair them.

I am no longer inserting nor identifying the type of inspections my buyers will perform. There’s no sense in opening a can of worms where enough worms are already crawling.

While Elizabeth is in Cuba, we revisit older blogs published elsewhere.