Inspections and appraisals are a huge hurdle to clear when selling your house in Overland Park. Real estate transactions can be quite complicated, so it is important to understand the process in order to make the best financial decisions. Learn more about what home sellers need to know about inspections and appraisals in Overland Park.
Sellers need to be well aware of how intricate of a real estate sales contract is and how inspections and appraisals play major roles in this. These sales contracts, or purchase agreements, will have an inspection contingency included in them. This protects buyers by giving them a certain period of time (typically 7-10 days) to have the property inspected for health and hazard concerns.
Purchase agreements will likely also include a contingency based on the appraisal of the property. This is put in place to ensure a buyer that will they not pay higher than what the home will appraise for. This is largely due to lenders not covering any amount over what a property appraises for. For example, if a buyer bought a property for $200,000 but it only appraised for $190,000… the buyer would have to cover that extra $10,000 all out of their own pocket on top of their down payment and closing costs.
Inspections and appraisals are typical processes of real estate transactions. Home inspections focus on the condition of the property structurally, as well as the systems which keep the home in livable condition. This includes items such as air conditioning, heating, plumbing, electrical systems, water damage, termites, and the condition of the roof and foundation.
The inspector will prepare a report for the buyers to make them aware of any issues that were found. There will always be some items that show up on the inspection report. No house is perfect, but if there are any major issues found, the options for the buyer and seller are clearly outlined in the contract. Typically, the buyer will attempt to renegotiate with the seller by any of the following ways:
- Lower the sales price of the house
- Require the seller to make certain repairs be made prior to closing
- Request funds from the seller to be applied to closing costs
After the inspections are completed, the contract will specific the amount of time the buyer and seller have to renegotiate the terms of the contract, if necessary. If the buyer and seller cannot come to terms, the sales contract may be terminated and the seller will have to re-list their house on the market.
Inspections and appraisals also bring into focus the actual current market value of the home, given all possible variables. While the inspection focuses on issues with the home, the appraisal is completed by taking several variables into account, including comparing properties that have most recently sold, that are most likely, and most near the subject property.
Appraisers have predetermined values for bedrooms and bedrooms in particular areas. They will add value to a property with more features than the comparable properties, or subtract from the subject property value for what may be lacking, such as having only a one-car garage, when those nearest all have two-car garages.
Mortgage lenders necessarily require the appraisal to meet the loan-to-value (LTV) ratio. Basically, the mortgage amount is divided by the appraised value. Lenders use this measurement as a guideline, the lower the resulting number, the lower the risk on the loan. Should the loan-to-value be a higher number, the lender may require mortgage insurance to be purchased as well. Wise buyers will ensure that there is a contingency clause in the contract based upon the appraisal results as well.
Failing to understand the impact of inspections and appraisals in Overland Park can lead to disastrous mistakes which can end up costing a home seller valuable time and a great deal of money.
It is very common for buyers to discovery their house isn’t worth what they thought after the inspection and appraisal have been completed. These clauses included in the purchase agreement to protect buyers may end up causing the sale to fall through. The buyer may ask the seller to pay for repairs, out of pocket, before closing or to deduct the value of the repairs from the price of the home and renegotiate a contract. All the while, the clock keeps ticking and the seller is now paying to hold the property longer than expected, meaning that in reality, they are losing even more of the valuable equity that had been built in the home, and actually making even less on the sale.
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We makes real estate transactions easy and without any of the problems that accompany inspections and appraisals in Overland Park. At Phenomenal Properties KC our network of professionals will lay out a plan to save valuable time and avoid what could potentially be thousands of dollars in repairs. A professional buyer’s purpose is to solve problems for sellers, so why not let a professional buyer, like Phenomenal Properties KC, guide you step by step through the process?