How Does a Home Inspection Affect Appraised Value?

After the housing industry crash of 2008, a real estate appraisal is now more important than ever. Because the economic climate today remains volatile, buyers are still very cautious in purchasing property. It seems as if no one is sure if a particular property is worth investing in or not.  The need to be absolutely sure of its value is brought to fore. This is the moment when real estate appraisal steps in.

Appraisers are accredited, state-licensed experts who figure out the value of a property. Their expert opinion on the appraised value of a property protects buyers from the danger of purchasing a property that has been overpriced. It also protects banks from investing in a property that has been underpriced.

It is worthwhile for buyers to know exactly what determines a real estate appraisal value, since this will be a tremendous help in upcoming financial transactions. And the main factor that determines an appraisal of a property is the real estate inspection.

real estate appraisalIt is a myth to say that real estate appraisal is the same thing as real estate inspection. In reality, they are two separate jobs that have a direct relationship with each other. Appraisers rely on the opinions of real estate inspection in order to gauge the value of the property. After all, any defects in the property, whether it is a wet basement or a faulty foundation, can have enormous implications in the purchase of a property.

Some structural problems are more critical than others. Consequently, what affects the appraisal of a property is not the number of structural problems in a property but how critical those problems are. For instance, real estate inspection may not give that much importance to cracked floor tiles all over the house, but it will take note of a single plumbing problem. What this inspection ensures buyers is that the property is in tiptop condition even before any purchase is made.

If a buyer wants an unbiased and expert opinion on the inspection of the property, then they need to find a third-party inspector. Most of the time, the services of real estate inspection is offered by the real estate company whose properties the buyer is looking into purchasing. However, the inspectors who come from real estate companies usually have opinions that favor the company, making it a biased opinion. Therefore, a tip of the trade is to find an inspector who does not have ties with the real estate company that owns the particular property. This will ensure that the inspector will not make any biased opinions on the property.

In addition to all this, a buyer must make sure that the inspector is recommended by other investors as well as being state-certified. What is most important in getting a third-party inspector is that most people who work in real estate appraisal trust the opinions of third-party inspectors more than those who are hired by the real estate companies. Once more, this is proof of the inseparable relationship between property inspection and property appraisal.

Another tip of the trade is to have real estate inspection check the property not once, but twice. What is usually the case is that there will be two different opinions coming from these two inspections. And what is most important is that these two opinions will inevitably lead to two different property appraisals. The question now remains is which of the two appraisals will most benefit the buyer without compromising the integrity of the property. The answer will lie in the real estate appraisal.

After taking in the opinion of the real estate inspection, an appraiser will most likely drop the price of the property. However, if a buyer were to purchase the property at this lowered price, the buyer will most likely have to finance the repairs of the property defects by himself/herself. As a consequence, a buyer must find an appraisal that includes in it the cost of the repairs of the property’s structural problems. Compared with financing the repairs themselves, buyers can save a lot of money and time if the cost of the repairs is included with the real estate appraisal.

If buyers continue to keep in mind that real estate inspection inevitably affects real estate appraisal, then they will be in a better position to invest and purchase. Unlike the financial crisis six years ago, buyers today know the tools of the trade that will enable them to make good financial decisions. These good financial decisions, coming from consumers all over the country, will promote a steady economy for the country.

Co-Author:  Chris McPeake

Related:  Contingency Clause in Real Estate Transactions