Financial Planning and Analysis

Does Appraisal Happen After Inspection?

Understand the typical sequence of property assessment steps in real estate transactions. Learn which crucial evaluation usually precedes the other.

When considering the purchase or sale of a home, navigating the various stages of the transaction requires careful attention. Each step in the process, from initial offers to final closing, plays a role in ensuring a transparent and secure exchange. Understanding the due diligence involved in assessing a property’s condition and determining its market value is a fundamental aspect of this journey.

The Purpose of a Home Inspection

A home inspection serves as a visual assessment of a property’s physical condition. Its primary objective is to identify existing or potential issues, safety concerns, and necessary repairs that might not be apparent during a casual viewing. Inspectors examine major systems and components, providing a comprehensive overview of the home’s integrity.

This assessment includes structural elements like the foundation, framing, roof, exterior, and interior components. Mechanical systems such as HVAC, plumbing, and electrical are also scrutinized. The inspector provides a detailed report outlining findings, which can range from minor maintenance recommendations to significant structural defects, giving the buyer a clearer picture of the property’s state. The cost for a home inspection generally ranges from $300 to $600, varying by location, property size, and inspector experience.

The Purpose of a Home Appraisal

A home appraisal provides a professional opinion of a property’s market value. Its function is to assure a mortgage lender the amount they are lending is supported by the property’s worth. This process is distinct from an inspection, focusing on determining value for financial purposes. Appraisers adhere to industry standards and regulations to ensure objectivity.

Appraisers consider factors like property size, age, condition, and amenities to arrive at a valuation. They also analyze recent comparable sales (“comps”) of similar properties in the immediate area. Local market conditions, including supply and demand trends, also influence the appraiser’s determination. The appraisal report details the methodology and data used to establish the property’s value, which lenders use to approve the loan. The cost for a home appraisal typically ranges from $400 to $700, depending on property complexity and location.

The Standard Order of Inspection and Appraisal

A home inspection generally occurs before the appraisal in a real estate transaction. This order provides distinct advantages for both the buyer and lender. Buyers often schedule the inspection soon after their offer is accepted, usually within a 7 to 14-day contractual due diligence period.

This timing allows the buyer to understand the property’s condition before significant financial commitments are made. If the inspection uncovers major defects or safety hazards, the buyer can renegotiate the purchase price, request repairs, or withdraw their offer without penalty, depending on the terms of the purchase agreement. Discovering such issues after an appraisal can lead to unnecessary costs for the buyer, as appraisal fees are typically paid upfront and are non-refundable.

Once the buyer is satisfied with the property’s condition, or after renegotiations are complete, the mortgage lender orders the appraisal. The appraiser’s valuation confirms the property’s worth for lending purposes, taking into account its overall condition, aligning with the lender’s risk assessment. While the appraiser observes the property’s condition, their role is to assess how these conditions impact market value, not to identify every defect like an inspector. This established order ensures that both the buyer’s interests regarding the property’s physical state and the lender’s interests regarding its financial value are addressed.

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