There are many steps during the homebuying journey. Once your offer is accepted on a new home, the next steps will be an appraisal and home inspection. Appraisal and inspection are two separate processes that can help you minimize financial risks with your potential purchase. An appraisal will help you understand the home’s current value; an inspection will help you understand the home’s current condition.
Appraisal Process
An appraisal will typically be required by your mortgage lender. It will determine the estimated market value of the home you want to purchase. By law, appraisals are done by a licensed professional who is not affiliated with your lender or real estate agent. The appraiser will determine the value of your home based on the location, the condition of the home, and the value of homes that were recently sold in the area.
The appraiser will then generate a final report and submit it to your lender for review. The report will help your lender decide whether to approve the loan for the new home. If the appraisal comes back lower than your offer, you will either pay the difference out of pocket or renegotiate with the seller. If the appraisal comes back higher than the asking price, then you will already have some equity in the home.
Home Inspection
A home inspection is exactly that – a thorough examination of the home to determine its present condition. During the inspection, a licensed inspector will examine the structure, roof, attic, foundation, electrical system, and plumbing. If anything major is reported, the buyer can often request that the seller cover the cost of fixing the issue.
Home inspections are often not required during the homebuying journey but are certainly recommended. An inspection can help protect your investment and reduce any potential risks. One thing to point out is that home inspections won’t necessarily catch every issue prior to the purchase of your home. But they can give you a better understanding of the home’s condition.
Both the appraisal and home inspection are costs that the buyer will pay. And that cost will vary depending on the size and location of the home. In some cases, the seller will cover the cost of the appraisal. If you have questions about inspections and appraisals, be sure to talk to your Axia Home Loan Specialist.
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