Home Appraisal vs. Home Inspection?
Buying a home in Portland? You may already have a lender and a real estate agent in mind, but do you also have a home appraiser and inspector in mind? Why does a home need both, anyway?
The key difference between a home appraiser and a home inspector is that they work for different people. The home appraiser is there at your potential home on behalf of your lender. The home inspector, on the other hand, is requested by you, the buyer – usually someone your real estate agent is recommending.
Your Home Purchase Team
What at first take might seem redundant is actually a very effective system for ensuring that the price you’re paying for a home is really what it’s worth. Think of the inspector and appraiser as more players on your team. When you ask your partner, close friends, kids or parents what they think of the price and condition of a home before you buy it, you’ll get different information than when you ask your real estate agent — but it’s all valuable information. In the decision-making process, the professionals that appraise and inspect your home perform the next line of inquiry.
Home Appraisers Assess Value
Home appraisers must be licensed and are selected by your lender from their list of approved appraisers. Their mission is to establish the fair market value of the home you wish to buy and report back to the lender so that they know whether the amount they’re loaning you makes sense. The home appraiser doesn’t do a detailed inspection — they’re just getting the basics. How many bedrooms? What’s the square footage? Are the exit door working properly? Is the basement flooded? A typical appraisal visit in our area runs 30 to 45 minutes.
The other big part of the appraiser’s job is to look at the comparable homes that have sold in the area. These numbers help them figure your potential home’s value. In a slow market, this is difficult because not that many homes will have sold in the given area, at least not in a relevant time frame. Luckily, in Portland right now real estate is moving quite well so appraiser’s estimates will be fairly accurate.
The home value the appraiser comes up with should pretty closely match the price you and the seller have negotiated. If the appraised value is less than the price you’ve offered to pay, the difference will have to be made up in cash, or the seller will have to come down on their price, or the deal is off! (This is where having a skilled real estate agent really pays off!) Pro tip: with so many multiple offer situations in Portland some buyers are offering prices that have no chance of possibly appraising, they are relying on the appraiser to bring the price down at the end of the day. This is a risky gamble, but it is a trend.
Home Inspectors Protect Home Buyers
A home inspection is heavily recommended in Oregon, and inspectors also need to be licensed in the state of Oregon. Most real estate agents have a few inspectors they like to work with because they’re reliable, experienced and reasonable. Unlike an appraisal, an inspection has no effect on the amount of money you can borrow, but they can definitely affect the terms of the transaction between you and the seller.
Home inspectors — good ones — leave no stone unturned when it comes to assessing the condition of the home you’re hoping to buy. They peek under the carpet and into heat ducts (they cannot cause any damage, but will look everywhere they have access to) They check out all of the home’s “mechanics”, including the water, electrical and plumbing system. They even typically get up on the roof to inspect its condition and crawl under home if there is a crawlspace.
Your home inspector will then hand you and your real estate agent a detailed report showing what they found in the home. This report will not say anything about the home value, but it will alert you to things you and the seller might not have known about, and help you determine if there’s anything that should be repaired before the home changes hands.
What if the inspection turns up costly repairs?
Sometimes a home inspection can reveal things about a home that the seller never suspected. Many issues can go undetected for long periods of time — in Portland’s older homes common ones are high radon levels, mold, broken sewer lines, or leaking underground oil tanks.
If there’s something in the home inspection you’re not comfortable buying into, speak up! Your real estate agent’s job is to make sure you’re 100% satisfied, and renegotiating is the most important thing they can do to ensure this. Just about any stipulation can be written into the sales contract, as long as the seller agrees to it. You could get a discount off the price of the home based on the repair estimate, or the seller could agree to fix the problem before the closing date.
Home buyers need to be extra careful when having the seller repair the issue. Details of the repair should be spelled out in the contract, or you risk having it “patched over” instead of actually fixed. Usually the best scenario is to have the estimated repair cost come out of the price of the home, then have a licensed professional you can personally pick and supervise – do the work.
A Real-World Scenario
Susan was a first-time home buyer who was thrilled when she found the perfect home in a charming Northeast Portland neighborhood, and at a price she could afford! The seller was not aware of any potential problems with the home so she and her buyer’s agent wrote up an offer. The appraisal by her lender came up with no flaws and set the value slightly above Susan’s accepted offer on the home. Everything looked right until the home inspection — which revealed a faulty sewer line which needed to be totally replaced with a potential bill of more than $10,000. Susan was heartbroken because she needed to move into a home that was ready to inhabit, not a fixer-upper! She also didn’t think she could afford the repair, not out of pocket.
Luckily, Susan’s real estate agent contacted the seller’s agent and they rewrote the offer. The seller agreed to replace the sewer line as a condition of the sale. The contract was rewritten to stipulate how the work was to be done and by whom. The closing would take a little longer, but Susan was able to work out a deal with her landlord so that she could stay in her rental another month.
Trusting Your Agent
When you know and trust who you’re working with, things just go so much smoother. You might not know any good lenders or reliable home inspectors, but we do. Our buyers’ team can hook you up with the people we’ve worked with for years. Buying a home is a complicated process — don’t let it be any harder than it needs to be! Contact our buyers’ team today.February 15, 2016