There are lots of reasons for first time home buyers to skip the appraisal,
survey and home inspection, and all those reasons are in the form of dollars.
But keep in mind that all three of these services can save you time, money and
heartache in the long run. To fully understand, take a look at what the home
buyer will get for the money and how it can help you get great loan options –
and a great home.
If you are looking for a first time home buyer home loan, you may be having
some trouble with the entire process. You’ve probably seen advertisements for
low loan rates, but when you become the home buyer, you may have been surprised
by the rates and terms of loans you’ve been offered. Having an appraisal can
help assure the lender that the property is worth the amount you’re borrowing
and that their loan is secure.
Many home buyers confuse the appraisal, survey and home inspection. An
appraisal is an expert’s opinion on the fair market value of a piece of
property, home, building or combination of these. It’s defined as the amount a
“willing buyer would pay a willing seller” for that property on the open market.
While the property may be worth much more than that to you as a home buyer for
some specific reason (it’s next door to your mother, has wheelchair
accessibility or is simply your dream home), that’s not what determines an
appraised value.
If you’re looking at a particular first time home buyer program, a home
inspection may be required. The appraiser will make an inspection of the home
and property, but remember that appraisers are generally not trained in home
inspection. The appraiser will typically note that he assumes all mechanical
systems (electric, heat/air, and plumbing) to be in good working condition.
A home inspector will crawl under the house, examine electrical wiring and
look for problems and potential problems. After the home inspection, the home
buyer will know if there are things that need to be fixed and you could even
have some ideas of what repairs will be needed in the near future. Many first
time home buyer grants also require both home inspections and appraisals. Again,
the purpose is to protect both the home buyer and the lender.
The survey is done by a licensed professional and his goal is to assure the
home buyer and lender that the property exists as it’s described. A survey may
not be required in an urban area because boundaries are typically very small and
are usually well established. But in rural areas and especially with large
tracts of land, surveys are very important. Most people can’t tell the
difference between 10 acres and 12 just by looking, but a surveyor can determine
that the property lines are where the descriptions indicate, and that the amount
of property actually available is consistent with what the home buyer is paying
for. This can also indicate when there are encroachments – other buildings,
fences, etc. that are on the property but shouldn’t be there.
First time home buyers may be thinking that the requirements like appraisals,
surveys and inspections make the process less than appealing, and you may very
well be right. But keep in mind that this is a big financial investment – the
biggest most people will ever make. Even if you have a perfect credit rating, a
lender is taking a chance on a first time home buyer. Having appraisals, surveys
and inspections cane make you as the home buyer and the lender more confident
that you’re making a good decision.
