When deciding to buy a house for the first time, you may encounter several unfamiliar terms and conditions. Recently, a customer confused inspection and appraisal. Many people might make the same mistake, so today I'll explain the difference.
Inspection
After you decide to purchase a home and enter into a contract, an inspection is a crucial process. Through an inspection, you can clearly understand the safety and overall condition of the house. This is very important when making a significant transaction. As mentioned in a recent Realtor.com article, a good inspection is an act of protecting your financial interests in what might be the biggest purchase of your life. With a good inspection, you can gather as much information about the house as possible.
During the inspection process, if there are any suspicious parts like the age of the roof or the condition of the HVAC system, you have the option to discuss and negotiate potential issues or repairs with the seller before the transaction is completed. And don't worry, you don't have to go through this process alone. Real estate agents and lawyers will represent you and negotiate with the seller on your behalf.
Appraisal
While an inspection informs you about the current condition of the house, an appraisal assesses the value of the house. In other words, when buying or selling a house, an appraisal ensures that the sale price matches the fair market value. This prevents homebuyers from paying more than the house is worth and ensures mortgage lenders do not lend more than the house's value.
No matter how much you're willing to pay for a house, if you're financing the purchase with a mortgage, an appraisal protects you from overpaying and prevents the bank from lending more than the house's value. However, in a sellers' market like the current one, you often have to pay more than the appraised value to purchase a house. On the other hand, in a typical market, if there is confusion or a discrepancy between the appraised value and the agreed-upon price in the contract, a reliable real estate professional can help negotiate to bridge the difference.
Today, I've written about the difference between appraisal and inspection. I'll come back with more helpful content next time.
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