Once an offer has been accepted on a for-sale property, a whole set of details have to be covered to fulfill obligations for buyers, sellers, and lenders. To get a better idea of what to expect from the accepted offer to final closing, here are 5 differences between inspections and appraisals for home buyers and sellers in Cincinnati. Appraisal deals with the value of a home, while an inspection deals with the condition of a home. Both are important parts of the home buying and selling process to protect their financial interest. Read more to better understand the difference between inspections and appraisals for home buyers and sellers in Cincinnati!
Both inspections and appraisals of a pending property serve important, but differing, purposes.
The appraisal is done to determine the value of the property for the sake of helping a mortgage lender figure out the potential liability of their issuing a loan to the buyer. If an appraisal comes in at a lower value than the agreed sale price, the lender may outright deny the loan or request the buyer renegotiate for a price less than the appraised value of the property. This ensures the property value is in line with nearby comparable homes.
In this current seller’s market where multiple offers are very common, it’s not a big surprise to see an appraisal come back not at the value of the offer price. Buyers are desperate to get a home under contract, so they overbid the value. At that point, a new negotiation pops up and most contracts have an appraisal contingency that favors the buyer. If you are bidding high on a property to win it, make sure you talk to your Realtor to understand the consequences of the home not appraising for its value.
On the other hand, an inspection is done to thoroughly examine the overall condition of the pending home. All structural, electrical, and mechanical aspects of the home are gone through with the potential buyer to help teach them about anything they may have overlooked previously.
Who Is Involved
The work of an appraiser is mostly done independently in their office, where they do a lot of research to land on the final estimated property value.
Some factors that affect this include the sale price of other comparable homes in the area and unique features that could have an impact on the value of the home. They will likely visit the property to do a quick review of the condition of the home in order to ensure nothing is out of the ordinary at first glance.
When it comes time for a home inspection, the inspector will meet with the buyer and their agent to perform the whole house inspection, and then create a report that is given to everyone. The inspector will walk the buyer through the house and discuss any possible safety hazards or issues that could arise just to keep the buyer up to speed.
Some people are under the impression that both the inspection and appraisal are required by law, but this is not necessarily the case.
Any mortgage lender will certainly request an appraisal be done in order to ensure their investment in the property is not over local market value and to make sure the buyer isn’t paying an astronomical amount for a lackluster home. Unless required by a lender or contract, inspections are entirely optional.
Even though they are optional, they are highly recommended to help a buyer obtain a clear understanding of the in’s and out’s of the property they are looking to purchase.
It should come as no surprise to anyone looking to buy or sell a home that both the appraisal and inspection come with a separate cost.
According to the United States Department of Housing and Urban Development, a home inspection will run between $300 and $500. You can expect the appraisal to cost between $300 and $450.
Keep in mind that these numbers are national averages that will be adjusted by locale, size of the home, and amount of detail involved in both processes.
Finally, there are some possible side effects to both the appraisal and inspection.
An appraisal could lead to an adjustment in property taxes on the home if the estimated value of the property is substantially changed from its last appraisal.
As mentioned previously, it can also lead to the lender saying we believe the home is not worth the offer price. In this scenario, the buyer will not be able to get a loan for the entire property. They will need to come up with the cash, renegotiate with the seller, or even, potentially walk away.
If you are in Cincinnati or Northern KY, and are seeing high offers on your home, that’s great news. But, make sure you are speaking with a knowledgeable and experience Realtor who can walk you through the process of what happens if your home does not appraise at that value.
An inspection could lead to the discovery of necessary repairs and in turn, provide an opportunity for the buyer to request certain contingencies be met prior to the closing of the sale.
Guidance Through Inspections and Appraisals in Cincinnati
If you’re looking for a partner to help you understand the difference between inspections and appraisals when buying or selling a home, contact us today at (513) 813-6293!