When you're buying your first home, you might encounter various terms and conditions that are unfamiliar. While you may have a general understanding of what an inspection is, you might not be clear on why it's necessary or how it differs from an appraisal. Let's break down these two key aspects of the home-buying process and what they mean for you.
Home Inspection
Once you're under contract for a home, getting an inspection is essential. An inspection provides a detailed look at the.png?width=360&height=270&name=blog%20post%20(1).png)
safety and overall condition of the property, which is crucial for such a significant investment. As a recent Realtor.com article states:
"A home inspection protects your financial interest in what is likely the largest purchase you'll make in your life—one where you need as much information as possible."
If the inspection reveals any issues, such as the age of the roof, the condition of the HVAC system, or other concerns, you can negotiate with the seller to address these problems before finalizing the transaction. Don’t worry—you won’t be navigating this process alone. Your real estate agent will advocate for you and handle negotiations with the seller.
You'll want to get the Home Inspection completed prior to ordering and paying for your appraisal. Most lenders require that the appraisal fee be paid upfront and you do not want to pay for an appraisal on a home that you have chosen not to purchase due to its' condition.
Home Appraisal
While an inspection assesses the current state of the house, an appraisal determines its value. As explained by Bankrate:
"An appraisal verifies that the sale price of the home aligns with fair market value, ensuring the lender doesn't lend more than the home's worth."
Consumers are able to pay above the appraised value of a home, they will just need to increase their down payment to cover the difference and their loan size will be based upon the appraised value. However, in most instances, when the appraisal comes in lower than the purchase price of the home, your agent will renegotiate the terms of your home purchase. They seller may reduce the price to meet the appraisal and if they don't then you have an important decision to make. Do you cancel the purchase or pay the difference.
In any event, your agent is there to help you with those decisions and will guide you to a solution that meets your goals.
Bottom Line
Inspections and appraisals are distinct but equally important steps in the home-buying process, and you don't have to manage them on your own. Reach out to me for your Arizona home purchase and I'll connect you with a real estate agent to get expert guidance from start to finish.