Today I’m here to chat about a question I received from a client recently: how do home inspection and appraisal relate to a mortgage? Are they required, can you skip one if you have the other…basically, what’s involved there?
Home inspection is pretty self explanatory. This is when you hire a licensed inspector to assess the property. They’re going to look at the condition of its parts, of what they can see, the mechanics of it: so the water heater (how good is it? Is it going to last?), the plumbing, maybe the roof (how long is it going to last and how old is it?), and make assessments based on that suggestion. If they know the roof is 20 years old, they may suggest that you will need to replace it in the next 2 to 5 years. All of these changes would affect the value of the property in your eyes.
In terms of a mortgage, home inspection does not usually come up unless there is something odd about the property that we notice or if there’s some interesting history that the lender or the insurer knows about. Even if you just have a purchase agreement and there have been a lot of price adjustments afterwards and there are notations for repairs or improvements. The lender might want to see a home inspection report just to make sure that these are regular maintenance items or just improvements and not indications of bigger problems in the future.
An appraisal seems like it is more common in relation to mortgages, but that might not be the case. For an appraisal, you’re getting a licensed appraiser, they usually compare the value of this property to neighbouring properties to give you an objective third party assessment of what the value of this property should be.
You may have experienced this in the past where a lender asked you to get an appraisal for the property. We’ve actually now been able to negotiate with our lenders here at Finder Financial Services, that we do not need an appraisal in every single case. It use to be the norm, and now we’re trying to get away from that to pass the cost savings onto you. Lenders now have ways to do automatic valuations or computerized valuations so they generally know based on all the statistics what the value should be.
In more unique circumstances, for example, a foreclosure, if you’re bidding on a foreclosed property, an appraisal would be necessary and you would be required to provide that. Other than that, usually we can get rid of that process and save you some time and money.
If that’s interesting to you or you wanted to know more, just give us a call at 1-866-924-5244.