During the purchase process, homebuyers will typically encounter home inspections and appraisals. First-time buyers may conflate these two processes, but they serve different purposes and provide insight to distinct parties.
Home inspections involve in-depth evaluations of properties as part of the home sale process. According to a poll from the American Society of Home Inspectors, 72 percent of homeowners in the U.S. believe the home inspection process helped them steer clear of potential complications with their current homes. Inspections provide details about the conditions of the property, specifically regarding any problems that may be costly or unsafe.
Homebuyers are responsible for paying home inspectors. The New York Times suggested that buyers have the inspection before making a bid or make the offer contingent on home inspection results.
Home inspectors typically assess the physical and internal structures of the home. This evaluation includes the plumbing, foundation, walls and insulation, among other critical features. Buyers should try to be present for the home inspection to learn more about their potential homes and ask the inspector questions about problems that may arise.
After the inspection, home inspectors will send homebuyers a full report. This report includes the severity of each issue, as well as the approximate costs of fixing them. If these problems are too much for buyers to handle, they may decide to not follow through with the sale.
This assessment is one of the first steps in the closing process. A home lender sends an unbiased professional to come to determine a property's value. Lenders want to make sure the loan amount aligns with the valuation.
When appraisals are lower than homes' purchases prices, lenders will loan only the appraised amounts. If this occurs, sellers could lower their asking prices, or the buyers need to make a larger down payment.
According to Realtor.com, a variety of factors contribute to home appraisers' evaluations:
- Size of lots.
- Square footage of homes, including the number of bedrooms and bathrooms on the premises.
- Condition of the home.
- Sales trends of properties in the same neighborhood or with similar features.
- Home amenities, like pools or patios.
If sellers believe the appraisal is too low, they may want to consider the amount of foreclosures in the area, as distressed properties can lower homes' values. If this is the case, sellers may be able to persuade the appraiser to re-evaluate the initial estimate. Sellers are responsible for paying for home appraisers.
Despite their similarities and differences, inspections and appraisals are both important for home sales. All homes must go through the appraisal and inspection process before they can be passed along from sellers to buyers.
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