Countless buyers aren’t doing a home inspection in today’s market. The high buyer demand and low housing supply is the driver behind this decision. When allowed, waiving the home inspection helps buyers to stand out among the other offers. However, doing a home inspection can save you a lot of time, money, and frustration once you settle into your home. Home inspections normally cost under $500, and the inspector might find something that could cost you $20,000 or more. Below we have listed what you should expect when you have a home inspection or when the appraisal is obtained during the processing of your loan.
If allowed by the automated underwriting decision, it is possible that an appraisal will not be required. Even if not required by the automated underwriting decision, the buyer can decide to have an appraisal completed.
A home inspection is an unbiased evaluation of the current state of a home. On the other hand, an appraisal determines the current value of the home. The American Society of Home Inspectors says,
“Home inspections are the opportunity to discover major defects that were not apparent at a buyer’s showing…Your home inspection is to help you make an informed decision about the house, including its condition.”
Once the inspection concludes, you will have the option to discuss any concerns and negotiate your offer price down if your inspector found something that is in jeopardy. Your real estate agent will be there to negotiate the price down or ask the seller to have any repairs done before the sale is final. Even though a home inspection can be stressful, it can expose the difficulties you may encounter after you purchase the home.
The home appraisal is just as important in securing a mortgage on your home. As Home Light explains:
“. . . lenders typically require an appraisal to ensure that your loan-to-value ratio falls within their underwriting guidelines. Mortgages are secured loans where the lender uses your home as collateral in case you default on the agreed-upon payments.”
When you apply for a mortgage, an appraisal is typically required by your lender (there are times where it isn’t required). An appraisal is the best way to confirm the value of the home and ensures the lender doesn’t loan you more than what the home is worth. When your offer is higher than the appraised value of your home, this is called an appraisal gap. Typically, if there is an appraisal gap, the buyer makes up the difference. This means, as a buyer, you should be prepared to bring extra money to the table.
While many homebuyers are waiving their home appraisal (if permitted) and inspection, it may not be in your best interest to do so. These unbiased evaluations are crucial when it comes to saving money in the long term. If you have any further questions or would like to get started on your homebuying journey, connect with our experienced team today!
Topics: Real Estate, Appraisal, Appraisal Value, Mortgages, Owning A Home, Inspections, Home Maintenance Tips, Home Purchasing, First Time Homebuyer, Home Appraisal, Home Inspections, Buying a Home, Home Purchase Tips, homebuying tips, homebuying process