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September 2020 Market Update for Calgary Video - for Stewart J Lowe & Associates .

September 2020 Market Update with a look at last months sales in Calgary.

Calgary Appraisal Vs Home Inspection

BANK APPRAISAL Vs HOME INSPECTION


It is important if you are thinking of buying or selling your Calgary home, that you understand the difference between a Bank Appraisal and a Home Inspection.

Some people think they are the same - FALSE.


The Bank Appraisal

The professional appraiser will give an unbiased, professional opinion of the property’s value.  Appraisals are performed in real estate transactions when a buyer is taking advantage of financing through a financial institution and also sometimes when a homeowner is attempting to refinance their mortgage.


The primary purpose of a bank appraisal is to ensure that the sale price that a buyer and seller agree upon is not more than the current market value of the home.  The appraiser considers the homes condition, upgrades, location and comparable sold homes in the area, and ensure that the contract price is appropriate. In the event a buyer defaults on their mortgage the bank does an appraisal to ensure they can recoup monies that they have lent to the borrower.


Seek advice on common appraisal issues such as a home appraising for less than the agreed upon sale price, this can help alleviate additional frustration.


The Home Inspection

Performed by a licensed home inspector to comply with the purchase contract. As a buyer when purchasing a home you have the right to complete a variety of different types of inspections.

 A general inspection of a home is a detailed investigation into a property’s plumbing, electrical, HVAC systems, roof, and other aspects of the home.


While a general inspection is the most common, it is not the only inspection contingency that a buyer has the option to include in their offer.  


Here are 5 other inspections that you could consider.

  1. Radon Test – A radon test is another inspection a buyer has the option to perform when buying a home. Radon is a cancer causing gas that can over a period of time be present.  If high levels of radon are present in a home, it must be mitigated by installing a mitigation system.
  2. Septic Inspection (Rural) – If a home has a septic system, another inspection that is fairly common is a septic inspection.  It is a good idea depending on home many live in the home to have an inspection every one to two years. A faulty septic system can create expensive problems in a home.
  3. Well Test (Rural) – If the home is not on City or Co-op water and has it’s own well, this will need its own test for quality of water analysis. GPM flow etc
  4. Chimney Inspection – If a home is equipped with a fireplace, it’s common a buyer will include a chimney inspection contingency.  A chimney inspector ensures that the chimney is safe for use. Especially if the home owner has not used it for a while.
  5. Foundation/Structural Inspection – Foundation and structural issues will scare away many buyers, therefore it is a common inspection that is completed. Sometimes these can be identified in the general inspection, and a structural engineer may be needed.


The differences between the Appraisal and a Home Inspection?

So let us look at the differences between an appraisal and a home inspection that are not commonly discussed.  Here are some of the major differences between a bank appraisal and a home inspection.


When Completed

One of the biggest differences between an appraisal and a home inspection is when they are actually completed.  When a buyer and seller agree to the terms of a real estate purchase contract, a buyer has a specified number of days from acceptance to complete the various inspections the offer is subject to.  The amount of days will vary, depending on the number of inspections that have to be done.

Once a buyer is satisfied with the inspection results, a bank appraisal will be ordered by the lender and completed.  It doesn’t make any sense for a buyer to pay for the appraisal before they are satisfied with the results from their inspections, otherwise they could be spending money for nothing.  Inspection results are the most common for deals to fall though.


Amount of time to complete

Another difference between an appraisal and a home inspection is the length of time it takes for each task to be completed.  A home inspection, depending on the inspector, can last anywhere between 2-4 hours to complete depending on the size of the home.  Since a home inspector is rarely the professional responsible for completing all of the inspections, such as a chimney inspection, it’s possible that the home inspection phase can take several days to complete because it may not be feasible to coordinate all inspections at once.


A bank appraisal on the other hand typically will last between 30-60 minutes, depending on the size of a home.  The bank appraiser will take measurements of the home, takes photos, and makes notes about upgrades to the home.  The bank appraiser is also looking for visible safety concerns in the home, such as missing handrails and peeling paint, but will not be as detailed as an inspection of the home.

Negotiation Phase

A difference between a banks appraisal and a home inspection is the negotiation phase.  After a home inspection is completed, if a buyer is not satisfied with the results, they have the opportunity to request repairs before possession or further negotiations on the price of the home, before they have the option to provide a non waiver and the deals fails.

When a bank appraisal is completed, if there is an issue with the homes value or repairs that are noted in the appraisal report, there is no negotiation phase.  


In conclusion

As you can see from the above information, there is a major difference between an appraisal and a home inspection when buying or selling your Calgary home. We hope we have helped you understand, that the main object of the Appraisal is to protect the lender and the Home Inspection helps the buyer understand what they are buying.

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