In Silicon Valley we use title companies to close transactions. In the east coast they use lawyers. One of the first reports one should obtain is Preliminary Title Report (“prelim”). You can have your Realtor get this for you for free from the title company. It will take 3-5 days to get one under normal conditions but in a pinch it can be rushed if your Realtor has a good relationship with the title company.

Preliminary Title Report

When you receive your report, you should review it for any inaccuracies. Make sure the owners of record are correct. If you have someone who is showing up as an owner who was bought out in years past, make sure this is corrected as soon as possible. I’ve seen situations where someone who used to be owner showed up a on a report who was no longer an owner. It can happen if someone was married then got divorced but didn’t update the title with the county recorder’s office. Sometimes a divorce decree will be needed to validate separation agreements. Sometimes a previous owner will need to come in and sign a quitclaim deed which is a document used to release their ownership interest. Most of the time these can be easy to fix but sometimes it gets messy. What if you can’t locate the other person or of they passed away? Going through all the potential problems and remedies will take hours. Instead, I would suggest you start on this early, before your home hits the market. The last thing you want is to have your home sold and you encounter delays and the buyer backs out.

Another thing to look for in the prelim is any liens against the property. If there is an old loan that was paid off but showing up on the report, you will need to work with the your Realtor and the title company to have this removed from the report. Note that the amount being showed as owed on the report is frequently much different than what is actually owed. At a later time the title company will verify with your lender how much is actually owed on the home and that amount should match up with your records.

Any easements will show up on the report. An easement is a right for someone or business to have access to enter your land. Most common are the rights for utility companies to go onto the property. Not as common can be something like a shared driveway with a neighbor where the driveway is on your land but a neighbor can access it to reach their home.

Verify the property taxes due. You should make sure all your payments have been reflected in this report.

Be extra careful if you see a Notice of Default in the report. This can lead to foreclosure even if you are about ready to put your home on the market. You should immediately notify your Realtor, the title company, your lender, and your attorney to remedy this situation.

You and your Realtor should review all the notes and make sure everything is as accurate as possible to save you from trying to make last minute fixes when you’re trying to close the transaction.

Termite Inspection Report

A termite report is really a report that shows any bug like infestation (commonly termites) or any damage to wood in the home. Current infestation or wood damaged items are referred to as “Section 1” items. If there are areas that could lead to damage but are not currently damaged (like a leaking shower door that has yet to damage any wood) these will be shown as “Section 2” items. Areas that fall under wood damage I often see are rafter tails along the roof line where the paint has not been kept up and the wood has rotted. It’s also common near the exterior garage door trim near the cement where water sits. Another popular location is under the bathroom floor from a loose toilet or leaky drain you cannot see unless you crawl under the home.

For sellers in Silicon Valley, it is recommended that these reports be done before you put your home on the market. You might be thinking… why doesn’t the buyer get those and pay for them? The answer is that you could do that. But buyers tend to exaggerate what could be wrong with the home resulting in a lower offer than you could generate if you had the report. Another thing is if a buyer makes an offer to buy your home and you do not have a termite report, they will very likely make their offer contingent upon an inspection. So they go and pay for the report and you’re thinking, yah, I just saved a few bucks. The buyer can then use any excuse in the report to renegotiate or back out of the transaction without a penalty. You will then have to start all over with a new buyer AND disclose anything that was in the first buyer’s report to any prospective new buyers.  Depending on the size of your home this report will cost between $250 to $750.

Home Inspection Report

This inspection will review all the major subsystems of your home including plumbing, electrical, appliances, etc. It will identify if anything is not up to current code. Not to worry on this one. Realtors usually know if a home was built in 1965 that everything will not measure up to current codes and can explain that to a potential buyer.

If the inspector tests something and it was not in working order, it will noted in the report. The good news is you can still repair it if you chose and notate the repair on the report. A buyer will review this report closely to validate what they are buying.

Typical things I see in an older home are lack of GFI outlets, ungrounded three prong outlets, electrical panel circuit breakers not labeled, loose toilets, and older piping. Some can have an impact on a buyer, others not so much. You should review these with your Realtor to see what, if anything, you can do to correct these items. The cost for this report can range from $375 to $1,000 depending on the size of your home.

Chimney Inspection Report

This is typically not ordered up front unless a serious defect shows up on the home inspection. A serious defect could be a sizeable crack in the chimney or firebox, or movement of the chimney when stress tested. Side note: In Silicon Valley, if a chimney needs to be torn down and completely rebuilt due to damage, it can only be rebuilt to a gas burning fireplace, not wood. Due to current codes. The cost of the report is about $250 per chimney.

Roof Inspection Report

This will tell the buyer the approximate age, useful life, and condition of the roof. Given the cost pf replacing a new roof, you can bet a buyer will want to know all about this one. Cost for this report ranges from $200 to $500.

Appraisal

I’m often asked by sellers if they should get an appraisal on the home. An appraisal will cost you about $500. The answer is NO. Go out dinner, enjoy your favorite meal and beverages, but save your appraisal money. It does you no good to show a buyer what your home appraisal. They are going to buy it based on what they are willing to pay, not based on what an appraiser (whom they don’t know) is stating. Further, if the buyer needs a loan to buy the home, the buyer’s lender must be the one to order the appraisal. So either way, you’re wasting your money.