There’s something about an industry-smart professional that can put people at ease. Your customers probably don’t know a lot about the differences between an inspection and an appraisal. To them, an appraisal might appear to be enough, but you know why your work is so important.
Question is, do you know what an appraisal is all about? The ability to answer those questions can breed a lot of goodwill and put your customers at ease. Here’s what you need to know about how inspections and appraisals are similar, how they’re different, and why they both matter.
Who Orders Appraisals and Inspections
Before a lender loans money to a borrower on a home mortgage, they want to know whether the house is worth it. The house itself is collateral for the loan, so it should be worth at least what the buyer is borrowing to protect the lender’s interest. For that reason, Bank of America says lenders require an appraisal for all financed home sales.
Unlike inspections, which the buyer orders or not if he chooses, the lender is usually the one who orders the appraisal. Buyers usually don’t have a say in who appraises the property, but there might be some room for negotiating that point with the lender. If an appraisal comes back too low, the borrower can request a new appraisal from a different source.
Who Pays for These Services
Lucky buyers, they foot the bill for everything. Even though the lender orders the appraisal and uses the information for their own interests, the buyer is responsible for paying the appraiser’s fee. This is usually one of the many costs that are settled up at the closing table. And if the buyer orders a new appraisal, they’ll pay the bill for both.
This is different from an inspection because you’ll be paid before closing. Your fees are unrelated to the financing of a home or any of the lender’s dealings. The buyer usually pays you up front, although you’re free to set your own payment requirements.
What Appraisals and Inspections Evaluate
The sole purpose of an appraisal is to determine whether or not it’s good business for a lender to finance it for the buyer. A lot of things factor into that. The appraiser will check the values of comparable properties in the area (usually called “comps”), look at data from recent sales nearby, and compare the house in question to those around it. She’ll also consider the age of the house and perform a walk-through to note its condition, plus take photos to document her findings for the lender.
Unlike an appraiser, your inspections are a hands-on examination of the whole house. An appraiser will probably spot major defects, such as a hole in the roof or broken windows. But Quicken Loans Zing suggests that she probably won’t know whether the breaker box is safe or if the furnace works at all. That is the biggest selling point for inspections.
Many buyers think that if an appraisal is required and the appraiser’s job is to evaluate the house, what else could they possibly need? For a layman, that’s a logical mindset. But you know the difference. An appraiser works for the lender and is more interested in overall home value. You work for the buyer, and you have the skills to find expensive and dangerous defects.
ICA School has made it our goal to educate men and women who want a career in home inspecting. Have you thought about being your own boss but aren’t quite sure where to begin? Get a demo, and see what makes our online program better.