What you Should Know About Appraisals and Inspections

Hey everybody, this is Beth Helvey with Couture Real Estate. I hope you're doing good today. So I wanna talk to you about appraisals and inspections and the differences between them. I was speaking to a buyer recently and they thought that an inspection was done prior to executing a contract and they had a good theory, it's a good idea. They said that you would then do this inspection and then you would base your offer off of the findings of the inspection and then go from there. And while that makes a certain amount of sense, that's not how we do things. What you're gonna do is you're going to make an offer on the property and you are gonna go then to your inspection timeframe. Now, your inspection timeframe occurs literally the day after the offer is executed, which means that everybody agrees to the terms of the contract and everybody signs off on the contract.

The next day is day one, and that starts your inspection timeframe, which is a negotiable timeframe. You can negotiate how long that will be during that inspection timeframe. You can have any inspection you want. You can have a general home inspection. You can check for termites, you can have a roof specialist to come out an ac or pool, if you want a plumber to come out, if you want an electrician to come out, you can do any of those things, but they must be done within that timeframe. You must get your results back within that timeframe. And if you are going to ask for repairs or ask for any renegotiation, you still must get all of that done within that inspection timeframe. Otherwise, the day after that inspection timeframe is over, you are now accepting the property and as it's conditioned. So you've got a lot to do with it, in a short amount of time.

Now an appraisal is something different. An appraisal is a visual inspection of the property. If you are buying your house with a loan, your lender will send someone out to do an appraisal, and that is a visual inspection of the property. What they're gonna do is they're going to look at things like how old is the roof? They're not gonna climb on it, but how old is the roof? Does it have a pool? What are the countertops like? What are the floors like? What are the um, cabinets like? Um, what are these things made of? What are the materials? Are they updated or not? How many bathrooms does it have? How many bedrooms? How big is the lot? Things like that. It's a visual inspection that occurs. And then what they're gonna do is compare it to other properties in the area that have sold typically within the last six months and come up with a price.

More often than not, your appraisal should be close to your contract price. You know, we're not doing crazy days like we did a couple years ago. These days, your appraisal should be darn close to your contract price. Uh, ideally your contract price will come in under the appraisal. Now, if your property does not appraise, then that is a whole other video that we're gonna do. The one exception to this is if you are getting a government backed loan, which is a VA loan, uh, an FHA loan, or if you're getting a U S D A loan, then that appraiser is gonna do a little bit more of an inspection, a little bit more of a home inspection type thing. They're gonna make sure that windows open and close

That flash, that water runs and things like that. It's a closer inspection because it is a government backed loan. Typically speaking, if you are someone who is using one of these three government backed loans, then what we as realtors are gonna do is make sure that you do not put an offer on a property that one of these three government institutional loans would then flag. Because what can happen is, is that appraiser can come back and say, uh, Mr. Seller, Ms seller, I noticed that this window's broken in order for this loan to go through this window must be fixed. And they can do that. Whereas if you're getting a conventional loan, they're doing it based solely on visual inspection. They'll see that that window is broken and take that into account when they do the pricing, but they're not gonna make the seller fix it.

Those are the two main differences. Now, your appraisal needs to happen within, typically speak in the first 30 days of your contract because you've got that loan commitment timeframe, which typically ends at 30 days. Again, that is also negotiable and that appraisal is part of that loan commitment process, okay? So that you can need to have that in so that you know whether or not you're actually going to get the loan. And for a lot of people that appraisal is a big, big part of them getting their loan approved. So you've got two things going on. You've got your inspection as many as you need, and then you have your appraisal. These are two different people with two different functions. If you are buying your home with cash, you can still have an appraisal and you can have an appraisal contingency if you want. If for some reason you think that the house isn't worth it, and I've seen this played out in negotiation, it is a negotiation tactic.

You can say to the seller, Hey, put your money where your mouth is. We're gonna have an appraisal. I want the property to appraise in order for this contract to continue. And you can have that done as well. So there you have it. Those are the two main differences between your inspection and your appraisal, your inspection. I encourage everybody to do, as a matter of fact, if you are my buyer and you refuse an inspection, I'll make you sign a piece of paper that said that you refuse the inspection. Um, and you can have any number of inspectors with any sort of specialty going to do that. Your appraisal is for your lender. So this is Beth Helvey. If you have the opportunity to get out inside and enjoy the sunshine, I'd encourage you to do so. Wear some sunscreen, drink a lot of water, and we'll talk to you soon. Bye everybody.

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