Worried about a home inspection or appraisal? Here’s what they cost and how to prepare

If you are looking to buy a new home, agreeing to an inspection and appraisal can help you make a more informed decision about your potential purchase.

While these tests tack on another expense to the already daunting homebuying process, these assessments can save you from more expensive pitfalls down the road.

In short, an inspection can help you identify any defects that need repair, while an appraisal serves to protect you and (mostly) your lender.

Still have questions on what to expect and why they are recommended to buyers? The Bee breaks down the different assessments and things to keep in mind.

Inspections checklist

Home inspectors typically check for the condition and functionality of a home. On average, an inspection of a single-family home can take anywhere from two to four hours, according to the American Society of Home Inspectors.

Unlike appraisals, inspections do not determine the worth of a home and instead result in recommendations on what needs repairing or replacing, according to The Mortgage Reports. Buyers typically pay for the inspection, which averages around $340, ranging from $240 and $401 depending on the size of the home.

Here is a brief outline on what a certified home inspector will look at, according to ASHI:

• Heating system — any installed heating equipment, vent systems and distribution systems
• Air conditioning system — any installed cooling equipment and distribution systems
• Interior plumbing system — interior water supply, water heating equipment, vent systems and fuel storage
• Roof system — roofing materials, roof drainage systems, flashing, skylights and chimneys
• Electrical system — electrical lines, conductors, cables and service equipment
• Interior — walls, ceilings, and floors
• Exterior — wall coverings, exterior doors, balconies and porches
• Insulation and ventilation — attic ventilation and interior exhaust systems
• Fireplace — stoves, fireplace inserts, chimney and vent systems

Here are some things buyers can do and keep in mind for an upcoming home inspection, according to Rocket Mortgage:

• Include a home inspection contingency plan in the purchase agreement, which allows buyers to back out of the sale in case the report comes back with many severe issues.

• Buyers should try attending the inspection to see any damage firsthand and identify any major issues. Be on the lookout for severe issues and ask questions.
• Review the home inspection report. It may be overwhelming to see every flaw of the home recorded, but an inspector should be able to discern what is most concerning.
• Ask for a discount on repairs, especially if costly. Buyers may be able to ask sellers to cover this cost or negotiate a lowered purchase price in exchange for covering the repairs. Consider only negotiating major repairs, as the buyer will most likely be responsible for smaller wear and tear costs.

The most common defects, according to the Mortgage Report, are faulty window seals, out-of-date roofs, air conditioning condensers, heating units and water heaters.

Often, sellers will opt for the cheapest repairs that are usually low-quality, so buyers should be cautious of this when negotiating repair costs.

According to a report from Repair Pricer, an average home inspection can result in around $10,000 in repairs, and the median average price per repair is $238.

Appraisal checklist

Appraisers are third-party contractors who determine the market value of a home, which provides useful information to buyers on what they are purchasing, according to Investopedia.

Appraisal fees in California, paid by buyers, are usually between $300 and $500, according to Bridgepoint Funding.

According to mortgage banker organization American Financing, appraisers typically assess the home’s general condition, size, landscaping quality, roof, foundation, lighting and plumbing quality, basement quality and finishing details. The appraisal will also take into account the location value, including school zone ratings, nearby amenities and proximity to public transportation.

Appraisers will count the number of bedrooms, bathrooms and fireplaces. They will also check the condition of sprinkler systems and swimming pools.

Then the appraiser will look at sale prices of nearby properties that are comparable to the one being purchased. After making some adjustments based on size, condition and amenities, they will use the data to determine the market value of the property.

What if the appraised value comes in lower than the agreed-upon purchase price? That lowers the amount of money the lender is willing to give and could put the purchase in jeopardy. Buyers often include an appraisal contingency clause in their purchase agreement, which allows them to walk away from the deal without penalty if the appraisal comes in low.

There are a few options for when this happens, according to Mortgage Reports.

• Seller and buyer negotiate a new, lower home sale price
  
  
• Buyer makes a larger down payment to meet the new loan amount
• Seller and buyer cancel home purchase contract

What if the appraised value comes in higher than the sale price? Buyers are in the clear to make an agreement.

This story was originally published June 22, 2022 at 6:30 AM.