The residential real estate market saw an unexpectedly good year in 2020. Despite the realities of a pandemic, a recession, and mass unemployment, approximately six million homes were sold. Average home prices also went up by 5%. The primary drivers for these significant figures were generally brought in by the pandemic.
Work-from-home arrangements for professionals and online schooling for kids increased the demand for more functional living spaces. These spaces were mainly available in single-family homes leading residents to migrate from busy commercial areas to the quiet suburbs.
A lot of people have been on the move lately. If you’re one of the many people looking to buy a home in 2021 for the same reasons, it’s probably a good decision with how the current market is set up. Actually, if you’ve already made an offer on a house, that’s even better. Just make sure not to miss some of the most important steps in home-buying: inspection and appraisal.
How Are They Different From One Another?
Technically speaking, home inspection and home appraisal are two separate processes. Some new buyers can mistake these for being the same. Although both of these give you a better understanding of a home’s condition, they look at very different aspects.
A home appraisal determines the market value of a home, whether the price that homeowners are asking for it is within reason. A home inspection, on the other hand, evaluates the physical condition of the house.
Here’s how you can distinguish one from the other and how to conduct them within the context of a global pandemic.
Are Things Working Properly?
If a buyer has already accepted your offer on a property, it’s ideal that a home inspection is done right after. This is usually the time when the seller grants you access to the house for conducting proper inspections and negotiate on any of the findings.
These inspections should typically be done by an individual or a team of highly specialized inspectors. The most common things that inspectors look at are the conditions of the plumbing, roofing, electrical, and foundation. Anything related to the integrity and functionality of the property.
In usual scenarios, you would be allowed to observe the inspectors as they conduct their examinations. However, given the current pandemic, it might be best to let them do their jobs alone to minimize the spread of the virus. You could ask inspectors to provide you with official documents, such as condition reports or EICR, to help you understand their assessments instead.
Should major issues be found during the inspection, you could consult with your real estate agent to work on negotiations regarding repairs with the seller.
Is It Really Worth It?
For home appraisals, there is no set guide to determine a home’s market value. Final appraisals can often turn out more or less than what a property is actually worth. This is still a necessary step, however, because it can give you an idea of different aspects of the house.
For example, other than the tour of a particular home, real estate agents also take into consideration other factors. The neighborhood that the house is in, the size of the home (floor area and square footage), and how it compares to other home sales in nearby areas.
With the current circumstances of the global pandemic, home appraisals have seen drastic changes. Depending on the area, sellers and real estate agents have either waived appraisals, done virtual house tours, or just drive-by examinations.
Regardless, coordinating with your real estate agent to see whether a property you’re looking at is within your budget and if it’s worth it for its market value. Real estate agents will always have your best interest in mind when conducting home appraisals.
Do I Have To?
When it comes to purchasing a home, buyers have a tendency to substitute one over the other. Either they only do home inspections without getting the home appraised or vice versa. It is highly recommended that you do both before closing a deal for good.
The costs of home inspections and appraisals are usually shouldered by the buyer. Essentially, it will help you protect a lot of people’s financial interests.
Inspections are geared towards long-term investments, making sure minimal maintenance is required once you move in. Appraisals, on the other hand, are essential especially if you’re looking to take out loans to help pay for a property. Lenders often make this mandatory to provide them with an assurance that their loans are in line with the market value of your home.
Buying your own home is a huge investment. It should only be natural for you to want to get a fair price and a fully-functioning property. Conducting these steps also allows you to request some accountability from the seller. Besides, what’s spending a couple of hundred now before settling in to potentially help you save thousands from repairs and other necessary costs in the future?