The importance of getting home inspections and appraisals in today’s competitive market can leave buyers with a lot of questions. Because of the extremely low housing supply in the Tulsa Metro area and throughout the nation, coupled with low housing supply, the intense competition is driving and leading some buyers to consider waiving those contingencies to stand out in this crowded real estate market.
Buyers really need to weigh all their options and be sure that is really their best move. Purchasing a new home is one both the largest and most important transactions in people’s lifetime, and it’s mission-critical to keep your best interests in mind. Let’s break down what you can expect from the appraisal and the inspection, and why each one is important and can potentially save you a lot of money, time, and headaches down the road.
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 value of the home. That appraisal ensures the lender doesn’t loan you more than what the home is worth.
Being in a competitive market like we are in today has pushed prices up due to multiple offers and low supply. What a buyer goes under contract the purchase price may end up being higher than what the property appraises for, in other words, what the bank is willing to loan on the property. – this is known as an appraisal gap. With the market conditions today it is quite common for the seller to ask the buyer to make up the difference when an appraisal gap occurs. That means, as a buyer, if you really want the home you have to be prepared to bring extra money to the table. It is very important you have discussed this with your real estate agent so you are comfortable with the amount you are prepared to pay if the appraisal comes in low.
Home Inspection
Like the appraisal, the inspection is just as important if not more so because it gives an impartial evaluation of the home by a licensed professional. While the appraisal determines the current value of the home, the inspection determines the current condition of the home. 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 – as a buyer you have the option to 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.
Also, there are buyers who are buying the property as-is, to give them a competitive edge, now this can be a great strategy, but when doing this it is critical to have inspections. A buyer needs to fully understand what they are getting into and if they can really afford to buy the home as-is. During your inspection time frame, based on the results of the inspections, you have the option to continue to go through with your as-is sale or decide financially it is not the right choice for you.
Keep in mind – home inspections are a certain out-of-pocket cost, and non-refundable even if you decide not to purchase the home, they are critical because they can shed light on challenges you may face as the new homeowner. Without an inspection, serious, sometimes costly issues could come as a surprise later on.
Bottom Line
Both the appraisal and the inspection are important steps in the homebuying process. They protect your best interests as a buyer by providing unbiased information about the home’s value and condition. Let’s connect so you have an expert guiding you throughout the entire process. Reach out to me Sabrina Shaw, here at Homes by Sabrina and eXp Realty, as I am always here to guide and serve you.