Home inspection and appraisal
Inspection and appraisal are two significant steps in the process of home buying. A home inspection is an exercise that is necessary to get a clear picture of the condition of the structure and features of the house you are buying. This exercise is carried out by a neutral professional and his fee is also paid by the buyer.
The sale contract signed by you and the seller mentions the date by which the contingency of home inspection needs to be completed. You must contact a qualified home inspector and request him to conduct the inspection of the house.
You can accompany the inspector during this inspection and ask questions about the condition of the house. However, you must wait for his detailed report to know the real condition of the structure and features of the house.
If the report of the home inspector does not reveal any big flaws in the structure and features, you can move ahead and close the deal with the seller.
However, if the report contains adverse remarks and observations, it is a red flag for you, and you have to decide whether to continue ahead with the deal or walk out of it.
Your sale contract gives you the freedom to walk out of the deal signed with the seller if you are not satisfied with the findings of the home inspector. After all, you need not buy a home that you believe will require costly and time-consuming repairs in the near future.
However, if you feel that you can go ahead with the deal, you can ask the owner to undertake the necessary repairs before the close of the deal. If he agrees to such repairs or lowers the purchase price so that you can undertake repairs on your own later, you can choose to allow the deal to move forward as per the mutually agreed schedule.
Home Appraisal is another important part of the process of home buying. It is demanded by the lender to make sure that the market value of the house it is financing is not less than the money it is disbursing to the buyer.
This appraisal is done by a neutral party and his fee is usually paid by the buyer. You must pay the fee of the appraiser before the close of the deal or agree to this amount added to your mortgage.
House Appraisal is important mainly for the lender but there have been instances where the deal has fallen through because of the appraisal value of the house turning out to be less than the sale price agreed upon by the seller and the buyer.
For example, if the lender has agreed to finance 80% of the purchase price of a house that is $500000, the lender pays $400000 while the buyer pays a down payment of $100000.
If, the value of the house turns out to be $400000 during the appraisal, the lender finances only 80% of this value which is $320000 and there is a shortfall of $100000 that must be fulfilled by the buyer and the seller. If no compromise is reached between the seller and the buyer, the deal falls through.
If both home inspection and appraisal go off smoothly as per the plan, you can breathe easily and move ahead to close the deal on time.