What You Need To Know About Home Appraisals & Inspections

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Home buying can be exciting, but it can also be confusing for many people. Leaving behind the limitations of renting for the freedoms of homeownership often means you’ll be exposed to a new, complex vocabulary. Understanding specific terms can help you better navigate the closing process. Two essential terms are appraisal and inspection.

What Is An Appraisal?

An appraisal is an independent determination of a home’s fair market value. The people who create these reports, professional home appraisers, usually carry a license to operate from your state. Mortgage lenders typically require an appraiser to visit the home, assess its condition, and compare recent sales prices of similar homes in the area. The appraisal report helps ensure you’re not paying more for a house than it’s worth.

What Is An Inspection?

On the other hand, an inspection is a more thorough review of the overall condition of the home. A licensed professional completes the formal evaluation of the interior and exterior of the home; however, these reviews are not absolute. While inspectors examine exposed items like plumbing, HVAC systems, and electrical wiring, they won’t go so far as to tear down sections of wall to see what’s inside.

The inspection report can alert you to needed repairs, safety concerns, or general defects that should be addressed immediately. The report may also make recommendations regarding areas that should be closely monitored for potential trouble down the line. Inspections reveal flaws in a home easily overlooked by an untrained eye.

Benefits of Appraisals and Inspections

Some mortgages, like the Federal Housing Administration (FHA) home loan, require an appraisal and inspection as a condition of funding. But even if the processes aren’t required, both provide numerous benefits for the buyer. Some include the ability to:

  • Renegotiate the sale price or walk away from the transaction if the purchase offer was contingent on report results
  • Minimize buyer’s remorse that might result from surprise repairs after closing
  • Gain peace of mind knowing the property meets minimum safety standards
  • Create a checklist and budget for future repairs based on knowledge of the home’s current condition
  • Secure enough homeowners insurance based on professional assessments instead of a guess
  • Learn that the home has built-in equity if the appraisal is higher than the sales price

Your mortgage loan officer can explain other terms that pop up on your path to homeownership. Always ask questions about any words or processes that are unclear. Use Call’s Ask Us Anything feature to speak with a dedicated mortgage consultant who can answer questions about the home loan process.

Read More: Do I Need a Home Appraisal to get a HELOC?

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