When you decide to buy your first home, you'll encounter a variety of terms and conditions that might be unfamiliar. While you may have a general idea of what an inspection entails, you might not be clear on why you need one or how it differs from an appraisal. To simplify the process, here's a breakdown of each and what they mean for you as a homebuyer.
Home Inspection
Once you're under contract to buy a home, getting an inspection is a crucial part of the process. An inspection provides a comprehensive assessment of the safety and overall condition of the home, which is vital for such a significant investment. As a recent Realtor.com article explains:
“A home inspection is something that protects your financial interest in what will likely be the largest purchase you make in your life—one in which you need as much information as possible.”
If the inspection reveals any issues, such as the age of the roof or the state of the HVAC system, you have the opportunity to discuss and negotiate potential repairs with the seller before finalizing the transaction. Don't worry – your real estate agent will advocate for you and handle negotiations with the seller.
Home Appraisal
While an inspection informs you about the current state of the house, an appraisal determines its value. As Bankrate explains:
“When buying or selling a home, an appraisal verifies that the sale price of the home is in line with fair market value. This ensures the homebuyer doesn’t pay more than the home is worth, and the mortgage lender doesn’t lend more than it is worth.”
Regardless of what you're willing to pay for a house, if you're using a mortgage to fund your purchase, the appraisal protects you from overpaying and prevents the bank from lending more than the home is worth.
If there's any discrepancy between the appraisal and the agreed-upon price in your contract, your real estate professional will assist you in navigating any additional negotiations to bridge the gap.
Bottom Line
Inspections and appraisals are different but equally important steps when buying a home – and you don't need to handle them on your own. Connect with a real estate agent today to ensure you have expert guidance from start to finish.
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