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Unwrapping what to expect in your home inspection, appraisal and closing

appraisal

What’s the difference between a home inspection and an appraisal? Have you budgeted for closing costs?

The home-buying journey can seem daunting when questions like these are around each turn. Before you get overwhelmed, take comfort that critical milestones of home inspection, appraisal and closing processes are all great ways to get more acquainted with your prospective new home. Plus, if you start your research early, you will be much more prepared when the time comes to have a home inspected and appraised.

Here’s a look at what to expect across three crucial parts of home buying.

Home Inspection

So you’ve found a house and you have submitted an offer… now what? The home inspection is the last opportunity to check for any defects with the house prior to locking in a commitment to purchase. This typically takes place within seven to 10 days of the initial offer. A home inspector, hired and paid by the buyer typically, will look at the plumbing, electricity and the overall foundation of the home and then provide a report with their findings. While home inspections aren’t required, they provide the buyer with several important opportunities in the home-buying process. Depending on what the inspector discovers, the inspection report may create an opportunity for negotiation on features that need to be repaired or replaced. You can potentially ask the seller to pay for the improvements, or you can ask for a lower sales price to offset the cost of the repairs.

Keep in mind, most inspection reports will include findings of multiple defects. That doesn’t mean you should pass on the home. After all, no property is perfect. What matters is whether or not the defects are deal-breakers to you, the buyer. For example, a small plumbing issue can be fixed rather easily and quickly. However, a structural issue could cause safety concerns and lead to expensive repairs that you might not be willing to take on. 

“The biggest issues almost always include water,” said Nick Gromicko, a certified home inspector. “Roof leaks, plumbing leaks, and foundation leaks.  And, of course, water leads to damage of personal property.  And then water leads to mold.”

Home inspections provide valuable information that can make or break your decision to purchase a home, as well as help you plan for future improvements.

Appraisal

An appraisal is a valuation of a property by a third party. The buyer typically covers the cost of the appraisal. The lender orders it, prior to the closing of the home, to ensure the home is worth at least as much as what the buyer is committing to paying. A qualified appraiser will compare recent sales of similar local properties, market trends and conduct a visual inspection of the home’s interior and exterior to determine the property’s fair market value. For example, an appraiser will check the condition of the walls, roof, floors and the structure’s overall integrity. They will also take into account any upgrades or amenities, as well as how maintained the home is.

If the appraised value ends up matching or is higher than the contract price, the transaction can continue as planned. Should the appraisal come in lower than the contract price, the closing process may be impacted.

If the seller is eager to sell the property, they might lower the listing price to match the appraisal. On the other hand, the seller might disagree with the appraisal and refuse to negotiate. If this happens, buyers can either make up the difference or request another appraisal in hopes the price matches. While buyers can request a second appraisal, the lender decides whether to push it through. If it’s denied, buyers can also choose to walk away from the deal.

Due to today’s booming housing market, the appraisal process may take anywhere from days to weeks to complete. The process can take even longer if the buyer or seller requests a second appraisal. 

“Something buyers aren’t aware of is that the appraisal process can take a while, depending on location, geography and the number of appraisers available at a company,” said Anthony Masseria, Vice President and Area Lending Manager at Citi. “However, once the appraiser is at the home, it’s generally about five business days,” Masseria estimates.

While the appraisal process can be stressful for buyers, it can be an important part of the closing process. An appraisal will allow both the lender and the potential buyers feel comfortable and confident in their investment.

Closing

Before being handed keys to their new home, buyers have to go through the closing process, which finalizes the home purchase. During closing, buyers sign several legal documents and pay additional fees, some of which are recurring costs like property tax. Others are one-time closing costs expenses, which may include: loan origination fees, application fee, mortgage broker fee, title insurance, appraisal fees, title search fee and other miscellaneous payments. Closing costs vary from state to state, but not all home buyers are aware of the expenses prior to closing. According to a study from ClosingCorp, a provider of residential real estate closing cost data and technology, 50% of buyers were “surprised” by how much they were charged at closing. 

Understanding the home-buying process isn’t easy. There are many different steps, which is why it’s imperative to ask questions and ensure you’re working with professionals who can offer guidance throughout the entire process.

“Because there are so many different parties involved in the closing transaction, communication is key. Which is why it’s important to set proper expectations with clients and guide them through the various stages,” said Citi’s Masseria. 

The home inspection, appraisal and closing are all crucial steps in the home-buying process. By knowing what to expect, you ensure you’re prepared financially and emotionally to close on your home.

The Citi team wants you to feel confident during your home-buying journey. Working with you in the mortgage process, Citi home lending officers are prepared to help you navigate inspections, appraisals, closings and more. Click here to learn more about how you can move into the home-buying process with everything you need to make the most informed choices.

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Sponsored content presented by Citibank, N.A. NMLS #412915. Member FDIC and Equal Housing Lender.

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