What’s the Difference Between a Home Inspection and an Appraisal?

If you’re planning to buy a home, an inspection is an important step in the process. It assesses the condition of the home before you finalize the transaction. It’s also a different step in the process from an appraisal, which is a professional evaluation of the market value of the home you’d like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase. Here’s the breakdown of each one and why they’re both important when buying a home.

Home Inspection

Here’s the key difference between an inspection and an appraisal. Bankrate says:

“In short, while an appraisal helps you understand a home’s value, inspections help you understand a home’s condition.”

The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process – like the age of the roof, the state of the HVAC system, or just about anything else – you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your real estate agent is a key expert to help you through this part of the process.

Home Appraisal

The National Association of Realtors (NAR) explains:

“A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lender’s decision to provide funds for a mortgage.”

When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the home based on the sale price. Regardless of what you’re willing to pay for a house, if you’ll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth.

This is especially critical in today’s sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.

However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check. If there’s ever any confusion or discrepancy between the appraisal and the sale price, your trusted real estate professional will help you navigate any additional negotiations in the buying process.

Bottom Line

The inspection and the appraisal are critical steps when buying a home, and you don’t need to manage them by yourself. Let’s connect today so you have the expert guidance you need to navigate the entire homebuying process.

Think Twice Before Waiting for Lower Home Prices

As the housing market continues to change, you may be wondering where it’ll go from here. One factor you’re probably thinking about is home prices, which have come down a bit since they peaked last June. And you’ve likely heard something in the news or on social media about a price crash on the horizon. As a result, you may be holding off on buying a home until prices drop significantly. But that’s not the best strategy.

A recent survey from Zonda shows 53% of millennials are still renting right now because they’re waiting for home prices to come down. But here’s the thing: the most recent data shows that home prices appear to have bottomed out and are now on the rise again. Selma Hepp, Chief Economist at CoreLogic, reports:

“U.S. home prices rose by 0.8% in February . . . indicating that prices in most markets have already bottomed out.”

And the latest data from Black Knight shows the same shift. The graph below compares home price trends in November to those in February:

So, should you keep waiting to buy a home until prices come down? If you factor in what the experts are saying, you probably shouldn’t. The data shows prices are increasing in much of the country, not decreasing. And the latest data from the Home Price Expectation Survey indicates that experts project home prices will rise steadily and return to more normal levels of appreciation after 2023. The best way to understand what home values are doing in your area is to work with a local real estate professional who can give you the latest insights and expert advice.

Bottom Line

If you’re waiting to buy a home until prices come down, you may want to reconsider. Let’s connect to make sure you understand what’s happening in our local housing market.

Trying To Buy a Home? Hang in There.

We’re still in a sellers’ market. And if you’re looking to buy a home, that means you’re likely facing some unique challenges, like difficulty finding a home and volatile mortgage rates. But keep in mind, there are some benefits to being a buyer in today’s market that give you good reason to stick with your search. Here are a few of them.

Long-Term Benefits Outweigh Short-Term Challenges

Owning a home grows your net worth – and since building that wealth takes time, it makes sense to start as soon as you can. If you wait to buy and keep renting, you’ll miss out on those monthly housing payments going toward your home equity. Freddie Mac puts it this way:

“Homeownership not only builds a sense of pride and accomplishment, but it’s also an important step toward achieving long-term financial stability.”

The key there is long-term because the financial benefits homeownership provides, like home value appreciation and equity, grow over time. Those benefits are worth the short-term challenges today’s sellers’ market presents.

Mortgage Rates Are Constantly Changing

Mortgage rates have been hovering around 6.5% over the last several months. However, as Sam Khater, Chief Economist at Freddie Mac, notes, they’ve been coming down some recently:

“Economic uncertainty continues to bring mortgage rates down. Over the last several weeks, declining rates have brought borrowers back to the market . . .”

Lower mortgage rates improve your purchasing power when you buy, and that can help make homeownership more affordable. Hannah Jones, Economic Data Analyst at realtor.com, explains:

“As we move into the spring buying season, mortgage rates have ticked lower, a welcomed sign of progress towards affordability.”

The recent drop in mortgage rates is good news if you couldn’t afford to buy a home when they peaked.

Home Prices Will Increase

According to the Home Price Expectation Survey, which polls over 100 real estate experts, home values will go up steadily over the next few years after a slight decline this year (see graph below):

Rising home prices in the coming years means two things for you as a buyer:

• Waiting to buy a home could mean it’ll become more expensive to do so.
• Buying now means the value of your home, and your net worth, will likely grow over time.

Bottom Line

If you’ve been trying to buy a home, hang in there. Mortgage rates have ticked down some recently, home prices are forecast to increase in the coming years, and the long-term benefits of homeownership outweigh many of the short-term challenges.

Have questions about buying a home? Not sure where to start?  I can help answer these and other answers, call or text 951-316-5916