When it comes to appraisals and inspections, what are the costs buyers and sellers can expect to pay? We’ll cover the differences in the two processes and show you how you can avoid inspections and appraisals by selling your house directly. We buy houses Illinois, and if you’ve ever wondered if you can sell your house directly, as-is — we can help.
For many, the largest purchase they ever make is a home, and for this reason, assessing the risks and protecting your investment is of utmost importance. Professionals in the real estate world understand the importance of determining costs associated with home ownership and real estate transactions, as well as the return on your investment. For this reason, they turn to home inspections and appraisals as indicators of home values for buyers, sellers, and lenders.
Appraisals and inspections serve two different purposes. Both include a review or assessment of the property and are completed by licensed professionals in their respective fields. But each differs in the processes and financial information appraisals and inspections provide, and they benefit buyers and sellers in different ways during the real estate transaction.
The Appraisal
Mortgage lenders almost always require an appraisal during the loan approval process. An appraisal helps to determine what a home is likely to sell for in the current market. The appraiser is a third party who has no financial interest in the outcome of the real estate transaction, and who makes an unbiased comparison in determining the numbers. The appraiser uses factors including the property’s location, the condition of the home, and the values of recently sold homes in the area which are the most similar to the property in question, called comparables.
In order to create his final report, the appraiser visits the home and completes a “walkthrough.” The appraiser will then review comparables and provide a full report revealing his or her evaluation. No information is provided until the report is final. Once submitted to the lender, the information regarding the current market value of the home is used to determine the risk of the loan. Since it’s rare that more than 97% of a home’s value will be lent to the borrower, the value of the property must exceed the amount the borrower is requesting from the lender.
If the lender requires the borrower to make up the difference between the loan amount requested and what the lender agrees to lend on the property, there are a few options. The borrower may need to come up with the difference independently, seek renegotiations with the lender or lastly, just walk away. On the other hand, if the appraisal comes in at a higher amount than what the borrower is requesting, the difference is considered as equity in the property.
The Inspection
Inspections are usually requested by the buyer after they’ve made an offer if they’re using a conventional loan. A licensed inspector will assess the current condition of the home as well as investigate the property in depth to locate any issues of concern that must be addressed. They’ll check for structural soundness, water invasion, exterior wear such as roofing, driveways and walkways, as well as plumbing, electrical and HVAC systems, appliances, and so on. They can even sometimes offer specific testing for radon levels and for mold in the attic or basement. Many inspectors will gladly take you along and explain their findings to you as they gather data. They may also take many photos, and will compile a report with their findings.
If the buyer is using an FHA loan, a property inspection will be required. In this case, the appraiser is also an inspector — he or she has TWO objectives. The Department of Housing and Urban Development (HUD) requires him or her to determine the current market value, as with any other appraisal. But they are also required to inspect the property to make sure it meets HUD’s minimum standards for health and safety. This makes the FHA process a bit unique, and it can mean the seller must make repairs to the property and then have it re-inspected before the loan is approved. Sellers should be aware of the type of loan a buyer is planning to move forward with when they make the offer, because this can have a big impact on the amount of repairs the seller will need to make to get the deal closed.
Once the buyer and seller in the transaction have received this final report, negotiation will begin. In Illinois, buyers can request any work they want and the inspection report can be used to support those requests. The number of items or depth of the work requested depends upon the inspector’s opinions given in the report. Different inspectors will have differing opinions on what ‘should’ be repaired and the urgency of those items, and to make it more complicated, many municipalities have adopted different building codes. This can make the outcomes of these inspection reports a bit unpredictable.
While a seller isn’t usually required to make upgrades on items that are functioning properly, the buyer can still request upgrades just to see if the seller will agree. Often the seller will feel compelled to make repairs or upgrades, or provide a sizeable credit to the buyer just to keep the deal moving forward toward closing. Worst case, the buyer may want to renegotiate the purchase price of the house in order to compensate for the inspections report findings, or walk away from the deal altogether. If the seller and buyer can’t come to an agreement on these items, the seller can put the house back on the market, but often this means taking a lower offer because of the perception that something is ‘wrong’ with the house if the first transaction didn’t go through.
The Bottom Line
Appraisals are based on what is visible at a glance and provide information on the value of the home and can influence securing the loan you seek. Inspections focus intensely on the condition of the property and required or preferred repairs and maintenance items that arise. While lenders will arrange appraisals, inspections must be arranged by the buyer in the transaction.
When you list your house for sale using an agent, your asking price must be set just right to attract buyers, and buyers want to know they’re on target with what they’re paying for a home. Buyers’ inspections and lenders’ appraisals provide this security in the transaction. Overall, buyers and sellers must trust in the information provided through appraisals and inspections to know what they can expect from the transaction and to decide whether to move forward with the deal or not, based on these reports.
We Buy Houses Illinois – Fast, As-Is, For Cash
If you’re selling your home and you need to sell it quickly, these reports may or may not be helpful to you. Depending on your selling situation, you may decide the house you’re selling is in such disrepair that fixing it up will not only be very stressful but you most likely won’t recoup the costs associated with it. You might want to sell your house as-is to avoid any requests from the buyer to make repairs, but there are also some loans that require certain repairs to be made for approval. There are unknowns that can come up during the appraisal and buyers’ inspection, but it’s certain that both will take time and will cost you money during the transaction.
If you’ve ever considered selling a house directly to an investor in order to avoid the extra steps a traditional real estate transactions requires, give Kendall Partners a call at (630) 389-8232 today. We buy houses Illinois, as-is, quickly, for cash. Let us show you how our hassle-free home buying process can help you sell a burdensome property. Our simple, on-page contract spells out how you will sell your house, and you can close in as little as 14 business days from the date of contract. We also pay all the customary closing costs, including survey and title. You pay your attorney fee, and your property taxes which are calculated in arrears in Illinois.
We’ve been buying home with cash since 2007, and we actually purchase your house. We do not wholesale — we don’t look for a third party to step in and take over the contract. When we sign a contract with you, we have the intent and ability to follow through and purchase your house, taking title in our name. You won’t have to worry about the deal falling through because of a third party — no lenders, no appraisals, no inspections, no waiting for an agent, a buyer, a mortgage company — let us show you how you can sell your house directly. It all starts with a short phone call to discuss your unique real estate situation, so give us a call at (630) 389-8232 or submit your information below. We can have you a cash offer range in as little as 24 hours. We Buy Houses Illinois — Check out our testimonials here!