We are speaking of two different subjects today-Appraisals which are one thing and inspections which are another. Many of my first time buyers are confused about the difference. The appraisal is an inspection to be sure-but it is very different from other types of inspections.
What the appraisal is all about is value. The reason for the appraisal is for a licensed appraiser to place a value on the home you are buying by evaluating the market in which the home is located. In other words, to compare and contrast the home to others in the neighborhood that have sold recently to be sure that the sale price is within the scope of what is happening value wise with similar properties. While an appraisal does in fact protect the buyer from paying too much for a house, the real beneficiary of the appraisal is the lender who does not want to be caught holding the bag on an overpriced property.
Other types of inspections are done in order to obtain condition information about the property for the benefit of the buyer and in the case of some specific inspections on government loans, the lender. Various types of condition inspections are whole house-which covers the basics of structure and mechanicals, termite and wood devouring insect inspections, well, septic and radon tests to name a few. Sometimes the whole house inspection may uncover an issue which requires further inspection by a specialist such as roof conditions or furnace and structural problems. While many people are not crazy about shelling out the cost of a whole house inspection (in our area $300-$400) this cost is minimal when considering that a situation that even the seller doesn't know about may be uncovered-such as termites that have invaded the studs of a portion of the home or a floating foundation-which will cost thousands of dollars to repair. Remember-once you own a home, you own any issues associated with it as well. There is no landlord to call. All repair costs will be coming out of your pocket.
It is important to note that even though whole house inspections may identify problems, a whole house inspection is not a guarantee that every issue will be uncovered. Whole house inspectors are generalists. If there is an issue that concerns a buyer it is to that person's benefit to have someone who is a specialist in the concern further investigate the issue.
Appraisers are required to note certain conditions of they see something that they feel needs to be looked at. However, appraisers are not contractors and do not possess the knowledge to be able to identify situations that are not obvious. They can look at a circuit breaker box for instance, and determine that the panel is wired for 100 amp service-but an appraiser would not have the knowledge to know if that box was wired correctly. So it is important for the buyer to know that they cannot depend on the appraiser to identify any significant condition issue. They might, but then again they might not.
When asked I always recommend that a borrower obtain a whole house inspection-even if the property is new. It is one more set of eyes to be sure that you are buying a property that will not need an infusion of money in the near future to keep it habitable. If for example the furnace is older but working the seller has no responsibility to replace it on the reasonable premise that it might fail in the next year or two. All the seller can be responsible for is the condition of the property when they sell it. In order to hedge some bets if there is a concern about some of the appliances or mechanical features of the home there are home warranties available for sale. Often the seller will pay for a one year warranty for the buyer as further protection as a part of the purchase agreement. Buyers are also able to purchase a warranty themselves if they feel it would be beneficial.
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