Industry terms run wild in real estate, and some may seem interchangeable. This week’s blog will discuss the similarities and differences between inspections and appraisals.
Appraisals
- Lender-driven: The lender orders an appraisal to know the home’s value. An appraiser will come to the house to determine the property’s condition. They will then compare the value of the house in question to other homes in the neighborhood or surrounding area. The lender uses appraisals to prove that the property is worth at least the sales price in the contract. A lender won’t approve the loan because the buyer and seller have agreed on a price. If the appraisal comes in lower than the sales price, the buyer must make up the difference between the appraised value and the sales price, or the seller and buyer will need to agree on a lower sales price. Should the appraisal come in lower than the sales price and the parties can’t agree on a new sales price, then, typically, the contract can be voided.
Inspections
- Buyer-driven: An inspector’s focus isn’t on the property’s value but on the property’s condition. Virginia is a buyer-beware state, meaning it is the buyer’s responsibility to know about any property problems before purchase. Sellers aren’t required to disclose much information about the property before the sale. They don’t have to share information with the buyers, even if they know the roof is bad or the washer and dryer are broken. In Virginia, a seller’s disclosure statement goes with the contract but states that the seller makes no representations or warranties about the property’s conditions. The best way for the buyer to ensure that they know what they are getting is to have an inspection done. Some buyers have waived their inspection to look more appealing to the seller, but the Highland Title + Escrow professionals always recommend an inspection for buyer protection. Contracts can include a contingency clause that either allows the buyers to request
repairs or void the contract should the home be determined to be in poor condition based on the inspection.
Please contact us here if you have any questions regarding inspections or appraisals.