By Mitch Kuffa
Let’s talk about the job descriptions of different people or entities involved in buying or selling a home.
My office regularly receives phone calls from confused home buyers, concerning who does what when purchasing a home. Unsure of who these individuals represent, nor what their specific function is, here’s a breakdown.
This is a person or group who are hired to handle all the technicalities of buying or selling land together with the buildings, trees, water, etc. They can represent the buyer or the seller. Their main function is to provide or pursue an interested market, help their clients through the myriad of paperwork, and basically act as an administrator in this real estate investment. The condition of the property that they become involved in is not usually a major concern because they are acting strictly as an agent for the buyer or seller.
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This entity represents the lender (and sometimes referred to as the “bank inspector”). His function is to look at the house structure from a value standpoint. His job is to verify to the lender the true value of the property. If the sale price is $100,000.00, they make sure that it is actually worth that amount. If you are asking for an $80,000.00 loan, they ensure the house value substantiates this size note (bank loan). They also verify that if the house is listed a certain way; a brick home, with 3 bedrooms, 2-½ baths, that it actually has those items (which again impacts value). During the appraisal process, if the appraiser runs across a construction concern that could impact value, he/she may note this item in his report and ask for back-up data from a licensed builder, sub-contractor, engineer or home inspector.
THE MUNICIPALITY CODE OFFICIAL (OR MORE COMMONLY KNOWN AS “THE BUILDING INSPECTOR”)
This entity and his building department are obviously answerable to the municipality they represent. In essence, they also answer to the Michigan Department of Labor (and in some cases the Michigan Department of Commerce). The function of the code official is to ensure the health, safety and welfare of the public and that any new construction is built to today’s code – ensuring that any municipality construction ordinances are abided by.
THE FHA INSPECTOR (FEDERAL HOUSING AUTHORITY)
FHA stands for Federal Housing Administration. This person only looks at a house or property if there is an FHA mortgage involved. The FHA is actually a Guarantor and this inspector is also responsible to the lender, his department and that branch of the government. They are saying that this specific transaction makes sense, is viable and meets the perimeters of THEIR REQUIREMENTS. They are commonly involved in new FHA funded constructions or if a problem arises or is detected in an older house that is now being financed via an FHA loan.
THE REAL ESTATE ATTORNEY
This person is a very essential and important entity and is basically employed by the person that pays him (most commonly the buyer and sometimes the seller). All attorneys do not specialize in real estate, but the real estate attorney advises his client, reviews the purchase agreement prior to signing, will typically recommend a survey if necessary and will review the closing package which includes the proposed deed/land contract, title insurance commitment and a break-down of all costs and fees.
THE PRIVATE HOME INSPECTOR
This person is responsible for the person who employs him which is most often the home buyer. This professional represents his client and looks at the house and related property in their best interest. He evaluates the major systems (site, foundation, framing, mechanical systems, etc.) and verifies to what degree they are functional. He looks at the real estate investment through the eyes of a builder and tells you what condition it is in, has it been maintained and if it needs any updating.
Don’t think for one second that the appraiser does the code officials job or that the code official does the realtors, etc. etc.. They all have distinct obligations, separate jobs and represent different entities. If you are buying or selling a property it is important for you to understand what all the different people do, who they answer to, AND WHO DOES WHAT FOR YOU.