Buyers in today’s market often have questions about the importance of getting a home appraisal and an inspection. That’s because high buyer demand and low housing supply drive intense competition and lead some buyers to consider waiving those contingencies to stand out in the crowded market.
But is that the best move? Buying a home is one of the most important transactions in your lifetime, and keeping your best interests in mind is critical. Here’s a breakdown of what to expect from the appraisal and the inspection and why each can save you time, money, and headaches.
Home Appraisal.
The home appraisal is a critical step for 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.”
Put simply: when you apply for a mortgage, an unbiased appraisal – typically required by your lender – is the best way to verify the home’s value. That appraisal ensures the lender doesn’t loan you more than the home is worth.
When buyers compete like today, bidding wars and market conditions can increase prices. A buyer’s contract price may end up higher than the value of the home – this is known as an appraisal gap.
In today’s market, it’s common for the seller to ask the buyer to make up the difference when an appraisal gap occurs. As a buyer, you may need to be prepared to bring extra money to the table if you want the home.
Home Inspection.
Like the appraisal, the inspection is important because it objectively evaluates the home. While the appraisal determines the home’s current value, the inspection determines the home’s current condition. As the American Society of Home Inspectors puts it:
“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.”
If there are any concerns during the inspection – an aging roof, a malfunctioning HVAC system, or any other questionable items – you can discuss and negotiate any potential issues with the seller. Your real estate advisor can help you navigate this process and negotiate what, if any, repairs need to be made before the sale is finalized.
Remember that home inspections are critical because they can shed light on challenges you may face as a new homeowner. Without an inspection, serious, sometimes costly issues could come as a surprise later.
Bottom Line.
Both the appraisal and the inspection are important steps in the home-buying process. They protect your best interests as a buyer by providing unbiased information about the home’s value and condition. Let’s connect with top-rated real estate brokers in Chicago, Illinois, at KM Realty Group LLC so you have an expert guiding you throughout the process.
