Most people confuse themselves with a property appraisal and a home inspection. And to confuse matters more a home inspection for the purpose of this post relates to having a contractor or a certified engineer walk through the home and point out any deficiencies to the potential buyer, this process usually happens when a conditional deal is put in place. The other inspection that is referred to during the buying process is a pre printed clause within the agreement of purchase and sale that acknowledges the buyer has physically walked through the property and is not purchasing through a 3rd party such as an auctioneer.
An appraisal is conducted by the lending institution to secure the mortgage on the subject property. In most cases an appraisal is ordered by the mortgagee regardless if it's a high ratio loan or not due to market conditions. Since the Toronto real estate market has seen a huge increase in value over a short period of time, lenders want to ensure the buyer has not over paid for the property and minimize its risk factor. Don't confuse a comparative market analysis, or CMA, with an appraisal. Real estate agents use CMAs to help home sellers determine a realistic asking price. Experienced agents often come very close to an appraisal price with their CMA'S, but an appraiser's report is much more detailed--and is the only valuation report a bank will consider when deciding whether or not to lend the money. A lender's appraisal report is sometimes vital when purchasing a home, especially in today's robust market. The buyer has limited remedies in the event the property does not appraise for the offered purchased price, please click here to read an article relating to the buyers remedies.
When conducting a home inspection it is vital to ask the inspector questions and just as important that the home buyer is present and walks through the home during the process. Prior to hiring a inspector, it is prudent to require someone who is accredited, typically a structural engineer is always a great bet. Remember that home inspectors will more than likely find issues with the home and he/she will make recommendations in price and time line of when these issues must be addressed. A prudent home buyer will do its own due diligence and not just consider a referral from either a friend, family member or even their Realtor of who qualifies as a reputable home inspector; starting your search online by reading reviews is a good start, interviewing and following up with testimonials is also a good step. Another method is to also hire a general contractor for the few hours to accompany the inspector during the process so the buyer could have a better idea of what the costs will be to bring the home to his/her standards.
As a consumer, especially when buying a home is typically the single largest purchase of one’s life, it is important to know the facts, working with the right group of people will help in the home buying process and eliminate the stress.