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What to Expect During a Home Inspection

Home inspections serve as a vital tool in the real estate industry, benefiting both buyers and sellers. For buyers, an inspection helps uncover potential issues or defects that may not be visible during a casual walk-through. This information can be used to negotiate repairs, request a lower sale price or even decide to walk away from the deal. On the other hand, sellers can use the inspection report to address issues proactively, increasing the chances of a smoother and more successful sale. Additionally, home inspections help maintain the integrity of the real estate market by promoting transparency and honesty in property transactions. In this blog, we’ll outline what you can anticipate during the home inspection process.

Scheduling

After an offer has been accepted, the initial step on the home inspection checklist for buyers is to schedule a home inspection. Buyers bear the home inspection cost and should choose a professional home inspector with a good reputation.

Certified home inspectors are crucial because their expertise and training ensure that a property’s condition is thoroughly and impartially assessed. Certification indicates that the inspector has met certain professional standards and is up-to-date on the latest regulations and best practices.

The Visual Examination

The visual examination conducted by a home inspector is a meticulous and systematic process aimed at assessing the overall condition of the property. It involves a detailed inspection of both the interior and exterior aspects of the home.

It is highly recommended that the home buyer be present during the house inspection process. Being present during the inspection provides an opportunity for the buyer to gain a firsthand understanding of the property’s condition. As you and the inspector go down the house inspection checklist, the inspector can point out issues, explain their significance and answer any questions.

An average home inspection is two to three hours. If you don’t have that much time to spare, you may choose to come for the final part of the inspection to discuss findings and ask questions. Ultimately, attending the home inspection is a valuable opportunity for buyers to make an informed decision about their potential future home.

You can follow your inspector along with your own home inspection checklist below:

  • Foundation: The foundation is the backbone of a house, and its integrity is crucial. Inspectors examine the foundation for any cracks, settling or water damage. Problems in the foundation can result in structural issues, underscoring the significance of evaluating this area completely.
  • Roof: The roof shields against the elements. Inspectors will check the condition of the roofing materials, such as shingles or tiles, to identify any damage, wear or deterioration. They will also look for proper flashing, ventilation and the absence of leaks.
  • Walls: Exterior and interior walls are reviewed for signs of damage or structural concerns. This includes checking for cracks, water stains and indications of pest infestations, like termites. Inside, inspectors might also identify issues related to the walls’ structural integrity or insulation.
  • Electrical systems: Inspectors will check the electric panel, electrical outlets, wiring, switches and fixtures for anything outdated or faulty that may cause safety concerns.
  • Plumbing: Plumbing inspections include assessing the condition of pipes, fixtures and drainage systems. Leaks, corrosion, water pressure and the functionality of all sinks, toilets, showers and faucets are scrutinized. Additionally, inspectors may examine for indications of water damage.
  • Heating and cooling systems: The inspector will evaluate the condition and functionality of the HVAC system, which includes the furnace, air conditioner, heat pumps and ductwork. They also look at safety features, like the cleanliness of air filters.
  • Appliances: Any appliances included in the purchase agreement will be assessed for their condition. Major appliances, such as stoves, ovens, refrigerators and dishwashers, are tested to ensure they function properly.
  • Structural and mechanical components: This category encompasses various aspects of the property’s structure and mechanical systems. Inspectors will check for issues like insulation, ventilation and proper grading around the foundation to prevent water drainage problems. They may also review the state of the home’s attic space.

It’s important to note that while home inspectors are highly trained and thorough, their examination is visual, and they do not perform invasive testing. If they suspect a hidden issue, they may refer you to a specialist or contractor.

Safety and Code Compliance

In addition to the visible aspects on the checklist, home inspections may include assessing whether the property adheres to local building codes and safety regulations. This provides assurance that the smoke detectors, carbon monoxide detectors, chimneys, windows, doors and other safety features are in place and functioning correctly.

Environmental Concerns

The professional home inspection checklist also includes an evaluation of any environmental concerns that could pose health hazards to occupants. Inspectors assess potential health risks such as:

  • Radon gas: Radon is a colorless, odorless and tasteless radioactive gas that can emanate from the ground and seep into homes through cracks and openings. Prolonged exposure to radon gas is linked to lung cancer. If elevated levels are found, mitigation measures may be recommended.
  • Mold: Mold can grow in damp or humid areas of a home and can cause a variety of health issues. Inspectors will look for any visible indications of mold development. They may also use moisture meters or other tools to detect hidden moisture sources that can foster mold growth.
  • Asbestos: Asbestos is a naturally occurring mineral that was once widely used in construction materials due to its fire-resistant properties. Home inspectors can identify materials suspected to contain asbestos and recommend further testing or professional remediation if required.
  • Lead-based paint: Homes built before 1978 may have lead-based paint, which is hazardous, especially to young children. Inspectors check for chipping or deteriorating paint and may recommend lab testing if they suspect the presence of lead-based paint. Remediation or containment measures may be necessary for
  • Carbon monoxide: Inspectors might check for the presence of carbon monoxide, a colorless and odorless gas that can be produced by gas-burning appliances. Carbon monoxide detectors are essential and subject to inspection to confirm their proper operation.
  • Hazardous materials: Inspectors can identify other hazardous materials or substances, like vermiculite insulation that may contain asbestos, or underground oil tanks that could pose an environmental risk.
  • Pest infestations: Termites and rodents have the potential to inflict structural damage and pose health risks. Inspectors might look for signs of infestations and recommend pest control measures.

Documentation

During the home inspection process, the inspector will meticulously record their observations by making notes and capturing photographs. This information is included in a detailed home inspection report, which is typically provided to the buyer within a few days of the inspection.

Discussion

After the inspection is complete, the inspector will meet with the buyer to discuss their findings. This is an opportunity for the buyer to ask questions and seek clarification on any issues discovered during the inspection.

Negotiations

Depending on the findings, the real estate agent may represent the buyer in using the inspection report to negotiate major repairs, request a reduction in the sale price or ask for specific items to be fixed by the seller. Typically included in the purchase agreement is a home inspection contingency so that these negotiations are possible.

Home inspections are an essential part of the home buying process, providing valuable information that allows buyers to make informed decisions and sellers to address potential issues. They promote transparency and help maintain the integrity of the real estate market.

Appraisals in Mortgage Refinancing: What You Need to Know

Occasionally, homeowners consider refinancing a mortgage during their homeownership journey. Whether it’s to secure a lower interest rate, reduce monthly payments, tap into home equity or change the terms of the loan, refinancing can offer a multitude of benefits. Yet, the importance of appraisals in the refinancing process is frequently underestimated. In this blog, we’ll explore the significance of a refinance appraisal, when it’s needed and the common types of home appraisals used.

What Does a Refinance Appraisal Do?

A home appraisal is a thorough assessment of the current value of your home. This market value assessment serves multiple purposes during the refinance process.

  1. Loan-to-value ratio: The loan-to-value ratio (LTV) is the ratio of the loan amount to the property’s appraised value. It matters when determining the risk of the mortgage refinance. A lower LTV signifies more equity in the property, which is seen as less risky to the lender. A higher LTV can lead to a higher interest rate or more stringent loan terms.
  2. Risk mitigation: Lenders use a mortgage refinance appraisal to minimize their risk. The appraisal for a refinance helps them establish a reasonable expectation of how much they can recoup should they sell the home if the borrower defaults on the loan.
  3. Compliance: Many regulatory and lending guidelines require an appraisal report for refinancing, particularly when the loan is to be sold in the secondary mortgage market. Appraisals help lenders comply with these regulations and ensure that the loan meets industry standards.
  4. Loan approval and terms: Appraisals can influence the type of loan a homeowner qualifies for. If the appraisal reveals that the home’s value is high, homeowners may be eligible for more favorable loan options, such as a lower interest rate or a jumbo loan. Conversely, if an appraisal comes in low, it may limit the loan options available to the homeowner.
  5. Asset verification: Lenders want to make sure that the property they are financing is real, in the condition described by the borrower and has no undisclosed issues that might affect its value. The appraisal process serves as an essential tool for verifying these aspects.
  6. Quality control: Appraisals help maintain the quality of the lender’s loan portfolio. If a mortgage lender relies solely on a borrower’s estimation to determine how much the home is worth, it could lead to loans with inflated values, increasing the risk of default.

Are Appraisals Always Needed to Refinance?

An appraisal is not always required for mortgage refinancing, but this depends on several factors, including the type of refinance, the LTV and the lender’s policies. Here are some common scenarios in which an appraisal may or may not be necessary for refinancing:

  1. Rate and term refinance: A rate and term refinance in which the borrower is simply changing the interest rate or loan term without taking cash out, an appraisal may not be required, especially if the loan amount is significantly lower than the fair market value.
  2. Cash-out refinance: If you’re looking to take cash out of your home’s equity as part of the refinance, an appraisal is typically required to determine the property’s current market value.
  3. FHA or VA refinancing: A government-backed loan, such as an FHA or VA loan, often requires appraisals for both rate and term and cash-out refinances. These appraisals report on the home’s market value and its current condition.
  4. Conventional loan requirements: Conventional lenders may waive the appraisal requirement for certain borrowers, especially if the borrower has substantial equity and meets specific credit and income criteria. However, this is at the lender’s discretion and can vary between lenders.
  5. Loan-to-value ratio: If your LTV is low, meaning you have a significant amount of equity in your property, some lenders may consider waiving the appraisal requirement. However, the specific LTV threshold that triggers an appraisal waiver varies between lenders.
  6. Streamlined refinances: Some government-backed loans, like the FHA Streamline Refinance and the VA Interest Rate Reduction Refinance Loan (IRRRL), offer streamlined, no-appraisal refinance options for eligible borrowers. These programs are designed to make refinancing easier and more efficient.

Keep in mind that while some lenders may offer no-appraisal or appraisal-waiver options, others may still require an appraisal based on their internal policies and risk assessments. Additionally, even if an appraisal is initially waived, the lender may request one during the underwriting process if they have concerns about the property’s value or condition.

Types of Refinance Appraisals

When you prepare for a mortgage refinance, different types of appraisals can be used to determine the current market value of the property. Here are some common types of refinance appraisals:

  1. Full appraisal: A full appraisal, also known as a traditional appraisal, is a comprehensive assessment of the property’s value. It involves a physical inspection of the property by a licensed appraiser who evaluates various factors, including the property’s condition, size, features on the interior and exterior and location.
  2. Drive-by appraisal: In a drive-by appraisal, appraisers look briefly at the exterior of the property from the street, but they do not enter the home. Drive-by appraisals are typically used for certain low-risk refinances. The refinance appraisal cost for this is less expensive and time-consuming than full appraisals.
  3. Desktop appraisal: A desktop appraisal does not involve a visit to the property. Instead, the appraiser relies on available data, including public records, comparable sales in the area and photographs, to estimate the appraisal value. Desktop appraisals are often used for streamlined or low-risk refinance transactions.
  4. Hybrid appraisal: A hybrid appraisal mixes traditional appraisal methods with technology. It may involve an appraiser inspecting the property’s exterior while relying on data and photos for the interior assessment. Hybrid appraisals are often quicker and more cost-effective than full appraisals.
  5. Automated Valuation Model (AVM): AVMs are computer-generated property valuations that use algorithms and data analytics to estimate a property’s value. AVMs don’t involve a human appraiser or a property inspection. They are often used for quick and low-risk refinances, but their accuracy can vary depending on the quality of the data and the specific AVM model used.
  6. Property Inspection Waiver (PIW): Some refinances, especially those involving government-sponsored enterprises (GSEs) like Fannie Mae or Freddie Mac, may qualify for a PIW. In this case, the lender relies on their own data or automated tools to determine the property’s value and may waive the need for a traditional appraisal.

The type of appraisal used can vary by lender, loan program or local regulations. The choice of appraisal type often depends on the lender’s risk assessment and the specific circumstances of the refinancing. Borrowers should discuss the appraisal requirements, including costs and implications, with their lender or mortgage professional to determine which type is needed for their refinance.

Choose Jaro Team for Your Mortgage Refinancing Needs

With a deep understanding of the local real estate market and a proven track record, we are well-equipped to secure the best refinancing options for our clients. We tailor solutions to meet individual financial goals and provide clear guidance throughout the refinancing process. By choosing Jaro, you’ll benefit from a dedicated and experienced team of professionals committed to helping you save money and achieve their homeownership objectives. Contact us today to get started.