One of the most misunderstood components of a residential real estate transaction is the difference between a home inspection and appraisal and the respective roles each one plays in the home loan process. Today’s article will focus on a related question that we, as lenders, often receive from homebuyers; i.e., “Do I really need to get a home inspection AND an appraisal?” Or in other words, “Isn’t an appraisal alone enough?” To properly answer this question several items must be taken into consideration, as follows:
Firstly, it’s important to understand that the appraiser and home inspector have completely separate roles in the home loan process.Put simply, the appraiser’s directive is to determine the fair market value of the given property while at the same time performing visual observations of the necessary items to determine whether or not the home meets the respective guidelines of the loan program for which you are applying (i.e. Conventional, USDA, FHA, VA or “Other”). I say this because the appraiser’s job is not to inspect every nook and cranny of the home to locate deficiencies and/or items of concern that they feel the buyer should be made aware of. This is, however, the role of the home inspector.
Secondly, it’s important to realize that lenders will rarely require a home inspection for most loan programs.In most instances a lender relies on the appraisal to determine if any further action is necessary for the property to be in compliance with the loan program being used. For instance, say an appraiser notates that there is a noticeable crack in the foundation and takes a picture of it to include in their report. A lender may require a qualified contractor to inspect the crack to determine the structural integrity of the property. On the other hand if the appraiser doesn’t note any potential compliance violations the lender will simply rely on the appraiser’s expertise and move forward with the transaction.
Ultimately, the decision of whether or not to get a home inspection is completely up to the homebuyer.There are many benefits to having a home inspection performed but in some cases it may not be necessary. It really just comes down to the homebuyer’s preference and how comfortable he or she is with the condition of the property. As always, it’s best to consult with a qualified real estate agent and lender before making an important decision like this.
Thanks for reading!