Buy a detached home today and you're likely
to need, want, or be required to get an appraisal, home inspection, termite report, and
survey. But do you need so many checks?
Each is a different report, it's just that sometimes they overlap and sometimes they point
out things that another report won't cover. What should you expect from these reports and
why would you want all four?
Lenders make loans on the basis of the sale price or the appraised value -- whichever is
less. An appraisal is an estimate of
value by an independent third party. It's required by lenders and reduces the lender's
risk by assuring that the property is at least worth x dollars in today's marketplace and
that the lender can safely make a loan based on that valuation.
A survey shows the boundaries of a property, where improvements are
located, the volume of the property (area), and such factors as easements and
encroachments.
This information can be important to you. For instance, if the current owners have somehow
added a garage that just barely straddles the lot line, a neighbor could demand its
removal. Or, it may turn out that what looks like the "backyard" is really is
much smaller -- it's just that there is no fence.
Surveys also show "easements," essentially the right of others to use your
property. For instance, a common is sometimes denoted by the letters PUE, or "Public
Utility Easement." This is a "right" that a utility has to enter your
property and install, maintain or repair their system. Your cable television company may
have an easement across your property, giving them the legal authority to string cable and
such.
A home inspection is sometimes confused with an appraisal, but they're
not the same. While an appraisal helps to confirm a home's value, an inspection looks at a
home's condition. Does the dishwasher work? What about the garbage disposal? Is the
electrical wiring up to current city or county code? How many years does the roof have
before needing to be replaced? Are there any conducive conditions for termite?
Speaking of termites, lenders require inspections for termites and other wood boring
insects. And while lenders require termite inspections, they generally do not say buyers
must obtain a home inspection.
If one is important and has been required for decades, why not the other? Surely the
lender wants the property in good condition because the property is security for the loan
if a borrower does not pay.
Buyers, of course, also want to know about the property's condition. No one wants to be
surprised by a major system that is quickly failing or the need to make a big repair.
So do you want all four checks? Of course. Get all four. Sleep at night.
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