Own Luxury Homes®
Step 6: Inspection, Appraisal & Underwriting
Inspection: 3 categories: routine (don't negotiate), negotiation items (credit/repair), deal-killers (exit contingency). Request credits not repairs — you control contractor. Appraisal gap 3 options: renegotiate down, pay gap cash, exit with contingency. 4 underwriting killers: new credit account, large credit purchase, job change, unexplained large deposit. Inspection contingency window: 7–14 days; miss it = lose exit right. Own Luxury Homes® 12-Point Agent Integrity Audit™ — inspection strategy before every contract.
Step 6: Home Inspection, Appraisal, and Underwriting — The 30–45 Days Between Offer and Closing
The contract-to-close period is where deals fall through — not because buyers and sellers stop wanting the transaction, but because the process surfaces issues neither party anticipated. Understanding the sequence, knowing which findings are material vs routine, and knowing what you can and cannot do during underwriting is the difference between a smooth close and a last-week emergency.
Step 6A: The Home Inspection — What It Is and Is Not
The Inspection Is Not a Pass/Fail Test
A home inspection is a visual examination of accessible systems and components by a licensed inspector working for you. It is not a code compliance review. It is not a warranty. It is not a guarantee that the home has no defects. It is an informed professional opinion about the condition of what was visible and accessible on the day of inspection. Every home inspection finds something. A 15-year-old home in good condition will have a 30-50 page report with hundreds of items ranging from "recommend caulking around bathtub surround" to "evidence of past moisture intrusion at northeast corner of basement." The buyer's job is to separate: routine maintenance items (handle after closing), negotiation items (ask seller for credit or repair), and deal-killers (walk away using inspection contingency).
| Finding Category | Examples | Buyer Action | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Routine maintenance (don't negotiate) | Caulk needed around tubs; GFCI outlets needed; dirty filters; minor grading | Handle yourself after closing; not worth negotiating goodwill | |||||||
| Negotiate: safety or system issues | Electrical panel concerns; older HVAC; roof 12–15 years; minor foundation cracks | Request seller credit or price reduction; get contractor quotes to support amount | |||||||
| Negotiate: major systems nearing end of life | HVAC 16+ years; water heater 12+ years; roof 15+ years with granule loss | Request credit equal to replacement cost estimate from local contractor | |||||||
| Deal-killer: exit under contingency | Active water intrusion; structural failure; undisclosed environmental hazard; major foundation issues; evidence of active mold unaddressed | Exit using inspection contingency within your window; earnest money returned | |||||||
| Seller won't negotiate; borderline issue | Roof 13 years, no issues visible; HVAC 14 years, serviced recently | Get quotes; decide if you can accept the risk; factor into offer reconsideration or exit | |||||||
| The inspection contingency window is typically 7–14 days. You must either negotiate a resolution or formally exit within that window. Missing the window forfeits your right to exit based on inspection findings. | |||||||||
Step 6B: The Appraisal — What It Determines and What to Do If It's Low
How Appraisals Work
Your lender orders an appraisal from an independent licensed appraiser to confirm the property's market value. The lender will fund up to the appraised value, not the contract price. If the property appraises at contract price: no issue; proceed to underwriting. If it appraises below contract price (appraisal gap): Option 1: Renegotiate the price down to appraised value. The seller must agree; if they refuse, you move to Option 2 or 3. Option 2: Pay the gap in cash. You cover the difference between appraised value and contract price out of pocket. On a $405,000 contract price with $380,000 appraisal: you fund the $25,000 gap in addition to your down payment. Option 3: Exit using the appraisal contingency. If you included one, you can exit and recover your earnest money. If you waived it: you cannot exit without losing your deposit. Always know your plan for an appraisal gap before you see the number, especially if you offered above the comp-supported value.
Step 6C: Underwriting — The Four Things You Must Not Do
The Rules During Underwriting
Once you are under contract and in underwriting, the lender's underwriter is re-verifying every financial detail from your pre-approval. Four actions that commonly kill loans in underwriting: (1) Opening a new credit account (auto loan, credit card, furniture financing). Every new account appears on your credit report and changes your credit score and your debt obligations. (2) Making a large purchase on existing credit (appliances, furniture, a new car). This increases your credit utilization and monthly debt payments, potentially pushing your DTI above the lender's maximum. (3) Changing jobs. Lenders verify employment; job changes trigger full re-verification and may require 30 days of new pay stubs before closing. New employment in a different field may require 2 years of history. (4) Making large unexplained deposits. Large deposits in your bank account trigger sourcing requirements: the lender needs to verify where the money came from and that it is not a loan. Paper gifts require a gift letter from the donor.
| What NOT to Do | Why | What to Do Instead |
|---|---|---|
| Open new credit accounts | New inquiries and accounts change credit score and DTI | Wait until after closing to apply for any new credit |
| Buy a car, furniture, appliances on credit | Increases monthly debt and DTI; may push past lender maximums | Pay cash if essential; defer large purchases until after closing |
| Change employers | Triggers full employment re-verification; new field may require 2-year history | If job change is unavoidable, tell your lender immediately before it happens |
| Make large unverified deposits | Lender must source all funds; unexplained deposits delay or kill the loan | Move money at least 60 days before closing; have paperwork for any large transfers |
| Co-sign on another person's loan | Adds debt obligation to your profile; increases DTI | Do not co-sign on anything during the underwriting period |
“The underwriting conversation I have with every buyer at contract signing: "Nothing changes financially until we close. Nothing. Don't buy a car. Don't finance furniture. Don't open a new credit card even if they offer you 20% off. Don't deposit cash without telling me first. Don't switch jobs without calling me the day you're considering it. I have watched buyers lose their approval because they financed a refrigerator at Home Depot three weeks before closing. The lender pulled their credit the day before closing as part of a final verification, found the new account, and had to re-run underwriting. The closing pushed three weeks. The seller almost cancelled. Nothing changes until the keys are in your hand."”
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes®
What happens during underwriting?
An underwriter reviews your complete financial file to verify: credit score and history, income and employment, assets and down payment source, and the property appraisal. They may issue conditions — requests for additional documentation. Respond to conditions immediately; delays extend your timeline. Do not make any financial changes during underwriting: no new credit, no large purchases, no job changes, no unexplained large deposits.
What should I negotiate after a home inspection?
Focus negotiation on: safety issues, major systems nearing end of life (HVAC 15+ years, roof 15+ years), and any findings the inspection report classifies as requiring prompt attention. Request seller credits (cash at closing) rather than repairs when possible — you choose the contractor and control the quality. Support every credit request with a contractor quote. Do not negotiate routine maintenance items; this antagonizes sellers and signals inexperience without material benefit.
Own Luxury Homes® — inspection strategy and appraisal gap plan before every contract. 12-Point Agent Integrity Audit™. Find a verified buyer specialist ›
"The introduction Own Luxury Homes® makes is to a specialist with documented closing history in your specific market — not the county, not the metro, the submarket you're actually selling or buying in. That's the standard we verify before your name goes anywhere."
— Ryan Brown, Principal Broker & CEO, Own Luxury Homes® (FL License BK3626873)