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Why A Home Appraisal Is Not A Home Inspection
Many home buyers can often be overcome with the sheer work behind buying a home. This is especially so for those doing it for the first time.
Most first timers don’t even know about various professions that people actually make a living off until they get involved with the real estate transaction process.
Escrow officers, title companies, conveyancing lawyers, etc. You name it.
There are a host of service providers that generate a huge source of their income by playing a role in property transactions.
And one of those that plays critical role is the appraiser.
Many home buyers make the mistake of assuming what an appraiser does includes home inspection, and would inform them of defects and damages that are present in a property.
This is not true.
The job of the appraised is to provide a professional opinion on what is the value of a property in question.
The process in which this is done is called an appraisal. And the value that is determined after all that word is call an assessed value.
That is the ultimate goal of an appraiser. To provide an expert opinion on the assessed value of real estate.
The purpose of this figure plays a material part in real estate components. Not least to 3 parties.
- The seller as he would want to receive a fair price on the house
- The buyer as he would not want to pay way above what the house is worth
- The lender as the value would determine the amount of loan that can be approved according to LTV
The assess value often sets the tone as to what type of price range negotiation between buyer and seller would center around.
While the condition of a house would be mentioned in an appraiser report, it would not specify specific problems or defects with a house.
It is simply beyond the scope of what an appraiser does. An appraiser might not even have the proper skill set to identify problems and judge the level of severity one is at.
For example, a house sitting on freehold land might be assessed by an appraiser to be $300,000. This after taking into account the floor area, recent transactions in the vicinity, new insulation system, etc. But the appraiser would not be inspecting the house to find foundation problems, pest problems, or piping issues that would cost a new homeowner $50,000 to fix.
Those specifics belong on the realms of qualified home inspectors and appraisers would not be able to provide credible information regarding them.
So don’t make the rookie mistake of assuming an appraiser would inform you of problems of a property.
This can be a very costly error and a lot of experienced real estate investors and flippers are actually counting on you to make them so that they can laugh their way to the bank.
For example, if a home buyer fails to discover a termite problem in a house. He might be purchase the property at close to the assessed value. But only realize month later that he has to spend tens of thousands of dollars to remedy.
The gist of all this is that an appraiser does not do the job of a home inspector.
And if you need the expertise of an inspector, don’t save a few bucks from not hiring one as it can really cost you in the future.