How to Streamline the Inspection and Appraisal of Your New Home
by Brad Pauly
on Monday, April 20th, 2020 at 10:39am.
For first time home buyers, the process can be quite overwhelming. One thing which you will have to think about is home inspections and home appraisals. These are often confused, but are not the same thing and yes, you do have to worry about both.
What is a Home Inspection?
A home inspection is a thorough, objective examination of the home's physical structure and systems. The home inspection is primarily for you. The inspector will check everything from the roof to the plumbing to the electrics and provide you with a report that lists what problems they find with the home.
You can then use this list to decide whether to go ahead with the purchase, as leverage against the Seller for a price reduction, have Seller pay closing costs, and/or have repairs completed prior to closing. No home is perfect; a house doesn't "fail inspection," but the inspector may find something that you personally don't want to deal with or consider a deal killer. The seller may already have done an inspection; you should not trust this but should do your own. In a buyer's market, you may be able to convince the seller to cover the cost.
What is a Home Appraisal?
A home appraisal, on the other hand, is required by your lender. A licensed appraiser will look over the house and give an honest, objective determination of its value. Appraisals are based on comparisons with the market and the appraiser's analysis of the physical condition of the house. While an appraiser may find problems, they are not looking for things that need repair in the same way a home inspector is.
Home appraisals are generally not required by certain government refinance programs, but are a must for new loans. You can make use of the home appraisal; it's generally done by your lender, but you have a right to a free copy which you can check for errors and use in negotiations with the seller; if the appraisal comes out much lower than the asking price then you may be able to make use of that.
Your lender will use the appraisal to determine whether you qualify for the loan or not.
How Can You Make the Process Easier?
So, if you are a little intimidated by this, then you may be looking for ways to streamline the process and make it easier. There are some things you can do:
Talk to your Realtor. Your Realtor knows who the experienced home inspectors are in the area, and they will gladly point you in the right direction. They want to make sure you get the right home. Confirm prices with your Realtor to confirm you are getting a fair deal. Then double-check by looking at reviews and feedback for the home inspection company. It’s important to find an inspector you can trust.
Work with the Seller. You don't want to get into an antagonistic situation with them over the timing of the home inspection; remember they have to get the house ready. Even if you are in negotiations over price, you should try to keep them friendly. Again, your Realtor can help with this. (Also, if the inspector has to make a return trip because the seller did something that interferes with the inspection, they will generally charge you for it).
The inspection report will be provided with a summary of issues that failed inspection. Decide what issues are deal-killers. If there is a concern that is beyond repair, it’s usually best to walk away from the property. Every transaction is different, so your specific situation will determine how much can be negotiated. Discuss with your agent your plan of action in determining what to ask the Seller to repair or closing costs paid in lieu of repairs. Everything depends on who has leverage in the transaction.
Decide and discuss with your realtor what you will do if the appraisal comes up short. Can you afford to pay the difference in cash between the sale price and appraisal price if the lender won't lend you the amount you expected? Are you able to negotiate with the Seller? Is there a point at which you will consider walking away?
Be aware that you can dispute an appraisal. If your appraisal comes in with a lower than desired valuation, you can dispute the value. Your Realtor can help by finding comparable sales data to send to the appraiser in hopes of an appraisal revision. Appraisers are only human and do sometimes make mistakes. However, winning a dispute is not easy.
Don’t Skip the Inspection
The home inspection is entirely for your benefit. If possible, attend your home inspection. Follow the inspector around the home, take notes, and learn about the ins and outs of the property you intend to purchase. If you can’t stay for the entire inspection, at least be there for the last 30 minutes so the inspector can go over the summary with their finds with you.
When should you consider walking away?
This has already been touched on, but the times you should consider walking away are:
The appraisal value comes in too low and you don’t have the means to pay for the difference in appraisal value and sale price.
The home inspection reveals major problems to the principal systems of the property and the Seller isn’t willing to make the repairs.
Home inspections and appraisals are crucial pieces to the buying process. The idea of finding your dream home only to discover problems you don't want to deal with at the inspection can be anxiety-inducing. Also, make sure your agent presents you with quality comparable sales in order to minimize the chance of contracting a home far above its appraisable value. The best way to get through it is to find a Realtor you trust. The experts at Pauly Presley Realty can help you through the entire home buying process, taking your side every step of the way and helping you find and close on your dream home with minimal hassle and stress.