I received these questions today and thought they would make a great blog:
In a Short Sale (or even a traditional sale), who pays for the inspection? The seller or the buyer?
Also, should an appraisal be done before submitting the Short Sale package and should the seller pay for the appraisal (or the buyer)?
Those are great questions, the home inspection in almost all transactions is paid for by the buyer. Here are a couple of different ways it is approached and the pros and cons of each:
1) Do the inspection at the time written into an accepted offer as in a traditional sale, usually within 10 days. That way if an issue comes up the price can be negotiated BEFORE the offer is submitted to the bank and everyone is on the same page. The bank does not expect to have to renegotiate and offer and it is very unlikely they will consider it after they have issued an approval.
2) The buyer wants to wait until they hear back from the bank to do a home inspection, knowing it is an "AS IS" sale. Usually this is because they want to save the money if the offer isn't accepted. The risk is buyers often still believe they can renegotiate with the bank after the inspection, and they might not be willing/able to deal with an issue that the inspection uncovers. In that case both parties may have wasted months in the process.
Regarding the appraisal, once the lender issues an approval after waiting months they often only give a short window to close, ie 30 days, even less on occasion. This can be tricky for the buyer who really should have all their financing ducks in a row to be prepared to close in the given time. They should discuss with their lender a game plan so they are ready to close within the time the bank allows.
I hope that answers your questions,