Homeowner Tips, Home Sellers Home Inspections vs. Appraisals
Many new home buyers use appraisal and home inspection synonymously, but the two are actually quite different. Inspections are not required, but choosing against one could result in discovering hazardous elements after you’ve purchased the home. So whether you’re a new or experienced home buyer, inspections and appraisals are necessary. Read on to learn their differences and what goes into each process.
What is an Appraisal?
Almost every mortgage lender will require an appraisal to ensure that they are not financing a loan higher than the property’s worth. Appraisals involve a third-party coming to the house and scoping out its features, location, condition, and comparables which are similar homes in the area used to compare pricing. The final report will determine the home’s true market value and aid in the lender’s loan approval decision. Additional features examined include the home’s proximity to parks, schools, public transportation, as well as the quality of schools in the area.
In general, the lender can only finance up to 97% of the home’s appraised value. If the appraisal comes back lower, you have three choices as the buyer:
- Ask the seller to lower their sales price to equal the appraised value.
- Pay the difference out of pocket by increasing the down payment.
- Back out of the sale if the contract included an appraisal contingency.
On the flip side, if the appraisal comes back higher than the offer price, you will have more equity in the home.
How Long Do Appraisals Take?
The appraisal process can take up to a week to complete. If your appraisal takes longer than you expected, there is likely a logjam for lenders because of the market boom in 2021. Right now, there is a lack of appraisal slots open. Also, the recent shift into remote work has decreased appraisers’ ability to conduct in-home appraisals.
What is a Home Inspection?
A home inspection is a more thorough examination of a home’s present condition to determine hazards, repairs, and issues. An inspector will walk through the home taking notes on the:
If there are multiple issues, the buyer can request that the seller lower their offer price, repair the damages, or pay for the repairs after the sale is finalized. As previously mentioned, a home inspection is not required, but almost all buyers will request one to avoid running into problems down the road.
Items Not Examined in a Home Inspection
Home inspections do not examine every aspect of the home, so the buyer may want to conduct extra assessments before closing. Examinations not included in a standard home inspection include:
- Well and septic system inspections
- Sewer inspection
- Lead paint inspection
- Pest and termite inspection
- Asbestos testing
- Chimney inspection
- Mold inspection
- Radon testing
Essential inspections you may want to consider are mold and pest inspections. These are common issues found in older homes, especially if the house’s foundation is made of old wood.
How to Prepare for a Home Inspection as a Seller
Although you may not be able to fix every issue before inspection, there are a few tips to help the process run more smoothly. Before an inspection, make sure to:
- Clean your home for easy access
- Clean off the roof of debris
- Replace burnt-out bulbs
- Check that the plumbing is functioning properly (toilets, sinks, etc.)
- Replace air filters
- Label the fuse box correctly
- Check door locks and frames for warping
- Tighten/replace faulty cabinet doors
- Check for leaks, wall sagging, and cracks
- Rid your property of unwanted bugs (wasp nests, anthills, etc.)
- Secure pets in a room or take them to a pet daycare
How Long Do Home Inspections Take?
The average home inspection takes anywhere from 2 to 3 hours. As the buyer, be sure to schedule an inspection before closing on the home.
If you have more questions about appraisals and home inspections or need help in the home buying process, contact a HomeHunt professional today!