If you’re a first-time buyer or haven’t been in the real estate game for a while, the inspection and appraisal may feel interchangeable. While they are both critical parts of the closing process, they are very different. A basic understanding of the inspection and appraisal can help you feel more confident going into the closing process. Read on to find out what the inspection and appraisal is.
What is a Home Appraisal?
A mortgage lender can only grant a home loan once the property appraises. After accepting your offer, a mortgage lender will hire a licensed appraiser to assess the home. The appraiser will consider the house’s condition, features, upgrades, location, and local comparables. The appraiser will compare the home to these recently sold comparable homes to ensure they align and the home is priced correctly. If the home is a cash purchase, it’s still wise to appraise it to ensure that the price is fair and reasonable.
While it’s rare that a home doesn’t appraise, it can still happen. This typically occurs if the area is highly competitive and the homes sell over the offer price. In this case, you have several choices.
- Renegotiate: If the home is appraised at a lower number than your offer, you can choose to renegotiate, and the seller may lower the price.
- Find a new lender: If the home doesn’t appraise, you can use a new lender, which means a new appraisal. However, this adds time and costs to the transaction, which may not be worth it.
- Request a new appraisal: If you feel the home was not appraised correctly, you can request a new appraisal by talking to the lender. Comparable sales data and an explanation of why the accepted offer makes sense in relation to the data may help with the re-appraisal.
What is a Home Inspection?
A home inspection assesses the condition of the home’s physical structure, factoring in the foundation, roof, and everything in between. As the buyer, you will hire a home inspector after accepting your offer. The inspector will visit the home and identify any significant issues that may not be visible to an untrained eye. The inspection is vital, because it will protect you from buying a home that could have problems that are costly or pose safety risks. The inspector will present you with a report of the findings, and it’s up to you and your real estate agent to determine the items to negotiate with the seller and the items you’re okay with assuming responsibility for.
There are a few things to remember as you prepare for a home inspection.
- Plan to attend the inspection to learn as much as possible about the property you’re purchasing and for the inspector to provide any commentary.
- In addition to existing issues, the inspector will identify potential future problems that aren’t visible to an untrained eye.
- Cracks in the foundation, heating, air conditioning, plumbing, or electrical systems issues, leaks in the roof, and code issues are all areas an inspector will review. Additional areas include:
- Home’s exterior: walls, doors, balconies, porches, decks, walkways, driveways, drainage system
- Home’s interior: stairs, doors, windows, cabinets, appliances
- Home’s structure: foundation, roof, walls, ceilings
