Establishing the fair market value of a piece of real estate is a crucial step in any home purchase involving a mortgage. Buyers can always perform due diligence with the assistance of real estate professionals, but they typically have no choice in the matter if they borrow the money to buy the property.
Depending on the lender that you work with and the type of property you purchase, it is possible that you may need to pay for an appraisal, an inspection and a survey before you can head to closing and actually buy the property. Why would you need all three of these professional reviews?
An inspection ensures the condition of crucial home systems
The major systems of a house play a major role in how much the property is worth. A home with many updates and new appliances, fixtures and mechanical systems will command a much higher price than a property in desperate need of upgrades and maintenance.
An inspector is a real estate professional capable of determining the condition of crucial systems in the home and producing a report about concerns and repairs necessary for the transaction to move forward.
An appraiser helps validate the selling price of the property
To put a fair and appropriate price on a piece of real estate, a buyer or lender typically needs to look at the objective facts about the property and sale records for similar properties nearby. Having someone do a formal appraisal helps ensure that the lender does not extend more financing than they will be able to recoup if the buyer defaults on their loan.
A survey is necessary when there are questions about boundaries or acreage
The buildings or improvements on a property aren’t the only things that influence its value. The land itself can be worth quite a bit, especially if there are multiple acres involved.
When the lender needs to validate the size of the parcel or when there have been changes to the boundary or disputes about it on record, the survey may be necessary to formally establish the boundaries and validate the price paid for the property.
Understanding the reasoning behind different expenses you incur while buying residential real estate will make the closing process less frustrating for you.