Marco-Island Home Buyer's Guide Tip of the Month Florida

Protecting Yourself and Your Investment

Make your offer subject to loan approval, an appraisal, termite and wood boring insect inspection, environmental inspections, written seller disclosure of property defects, and a home inspection. Ask the seller to provide a home warranty also.

Make sure the loan approval states the maximum interest rate you will pay and maximum discount points if you are paying them.

The appraisal is to ensure you don't overpay for the house. The mortgage company selects the appraiser. You pay for the appraisal at the time of loan application. (This is part of your closing costs, but you pay this portion ahead of time, approximately $250-$350.) If the home doesn't appraise for the selling price, you must pay the overage in cash (a very bad idea), get the seller to come down on his price to match the appraisal, or not buy the house. Make sure the fine print of the contract states in the case of a low appraisal, you have the right to receive your entire good faith deposit back and be released from all further obligation to buy the dwelling.

The termite inspection makes sure the property is not presently infested with termites or other wood-boring insects nor is there any damage from them. Make sure your offer contains provisions for the seller to pay for extermination and any needed repairs.

Environmental inspections include lead paint on homes built before 1978, and depending on the part of the country, radon or asbestos. Generally, your lender requires these inspections as a condition of the mortgage.

Most states now require seller disclosure informing you of home defects. Read the disclosure carefully before making your offer or make your offer subject to receiving and approving the disclosure.

The home inspection is to make sure there are no hidden problems. You select the home inspector. Your agent can recommend several or you can find your own. Make sure the one you chose is certified and a member of the American Society of Home Inspectors (ASHI).

Specify the inspection is to be done within a few days of contract acceptance. You should accompany the inspector when he does the inspection; expect to spend about 3 hours. You pay him at that time-estimate $250. FHA now allows you to finance the fee in with your mortgage, if you don't want to pay cash.

Make sure your offer states if there is anything your inspector finds unacceptable to you, you have the option to withdraw from the contract and your deposit will be returned in full. Also, make sure you specify that any repairs required by the inspection will be done by licensed professionals with professional grade materials, you will be given the receipts, and you (and your inspector, if you want) will be allowed to re inspect the repairs at least 48 hours before closing.

Here's how this usually works: the inspector does the inspection when the offer becomes a contract. He then gives you the written report. You immediately, in writing, notify the sellers if you will still purchase the home and if so, what flaws you want repaired. The contract should specify how long the seller has to respond. If he does not agree to the repairs, the options are to 1) accept the house as is, 2) not buy the house, or 3) renegotiate the sales price.

Ask for a home warranty to be purchased by the seller to cover major mechanical systems for the first year of your ownership. Home warranties have a $35 to $200 deductible and cost between $275 and $500. Most of them have a provision for you to renew after the year.