Buyers in markets like San Francisco or New York should expect to pay over $500 for an inspection and $600 for an appraisal.
Home Inspection and Appraisal Tips
The home inspection process
Home is where the heart is — but it’s also where damage could be lurking beneath the surface. While home inspections are not technically required for you to close on a house, this step is essential for those looking to uncover expensive and potentially dangerous issues upfront. Given the high price of buying a home, it’s money well spent.
Benefits of home inspections
Home inspections can:
- Surface potentially costly problems, such as outdated electrical wiring, corroded plumbing, a leaky roof, water damage and more.
- Help plan for repairs that might be needed down the road, or negotiate for the seller to make necessary fixes or price adjustments. If your inspection uncovers something really scary, such as black mold, you may renege on your offer. This is why most buyers make their offers contingent on a satisfactory home inspection.
- Serve as a tutorial on key features of the house, from crawl spaces to control panels. A good inspector will take you through the house to point out flaws, quirks and features — think of it as a hands-on user manual.
How much does a home inspection cost?
The price of a home inspection depends on your location, the size of your home and its features. For a larger home or one in higher-priced markets like San Francisco or New York, buyers should expect to pay over $500, while the national average home inspection cost is $315. Even then, it’s money well spent given the high price of buying a home and making repairs.
If your inspector identifies roof problems, radon, pest damage or other serious issues, he or she may refer you to specialized experts — a small price to pay for your ongoing peace of mind.
To find a reliable home inspector, start with your real estate agent’s recommendations. Experienced realtors will have their trusted people.
But, even with recommendations, we still recommend you exercise due diligence. Seek reviews on home inspectors via sites such as Angie’s List and the Better Business Bureau prior to hiring them. Ask if they belong to one of the three professional industry associations (ASHI, HANI and InterNACHI). Be sure that your prospective inspector has insurance and a valid professional license. As the old journalism motto goes: “If your mother says she loves you, check it out.”
The home appraisal process
While home inspectors focus on the condition of the home, home appraisers focus on its value. As part of assessing value, inspectors look at recent comparable sales (i.e., “comps”) for similar houses in that neighborhood or similar neighborhoods. They check the house’s square footage and its general condition, noting any features and appliances that might influence value.
All lenders require an appraisal and will schedule it to be executed during the mortgage loan process to make sure the purchase price reflects the home’s actual value. Make sure your sales agreement includes an escape clause if the appraisal estimate comes in below the agreed sale price. This contingent clause will allow you to walk away from the purchase or, at least, renegotiate a lower offer if needed.
How much does a home appraisal cost?
Although buyers typically pay for appraisals — the national average is about $330, but it can be double that in higher-priced markets — lenders choose the appraiser and handle the details. Unlike the inspection, you won’t be present for the appraisal, but you will get a copy of the report.
What happens if the house’s appraisal is lower than expected? Although home sellers can dispute a low appraisal, the lender will typically adjust the value of the loan to a lower amount, though in some cases they may back out of the loan altogether.
In a competitive market where sellers have the upper hand, you might need to make up the difference with a larger down payment or back out of the deal. In a balanced market, a low appraisal is usually reason to re-negotiate with the seller.
Whether you’re considering buying a house for you and your family or looking into real estate as an investment, these home inspection and appraisal basics can help guide you to a successful close.
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