Should First Time Home Buyers Have an Appraisal, Survey, and Home Inspection?

There are lots of reasons for first time home buyers to skip the appraisal, survey and home inspection, and all those reasons are in the form of dollars. But keep in mind that all three of these services can save you time, money and heartache in the long run. To fully understand, take a look at what the home buyer will get for the money and how it can help you get great loan options – and a great home.

If you are looking for a first time home buyer home loan, you may be having some trouble with the entire process. You’ve probably seen advertisements for low loan rates, but when you become the home buyer, you may have been surprised by the rates and terms of loans you’ve been offered. Having an appraisal can help assure the lender that the property is worth the amount you’re borrowing and that their loan is secure.

Many home buyers confuse the appraisal, survey and home inspection. An appraisal is an expert’s opinion on the fair market value of a piece of property, home, building or combination of these. It’s defined as the amount a “willing buyer would pay a willing seller” for that property on the open market. While the property may be worth much more than that to you as a home buyer for some specific reason (it’s next door to your mother, has wheelchair accessibility or is simply your dream home), that’s not what determines an appraised value.

If you’re looking at a particular first time home buyer program, a home inspection may be required. The appraiser will make an inspection of the home and property, but remember that appraisers are generally not trained in home inspection. The appraiser will typically note that he assumes all mechanical systems (electric, heat/air, and plumbing) to be in good working condition.

A home inspector will crawl under the house, examine electrical wiring and look for problems and potential problems. After the home inspection, the home buyer will know if there are things that need to be fixed and you could even have some ideas of what repairs will be needed in the near future. Many first time home buyer grants also require both home inspections and appraisals. Again, the purpose is to protect both the home buyer and the lender.

The survey is done by a licensed professional and his goal is to assure the home buyer and lender that the property exists as it’s described. A survey may not be required in an urban area because boundaries are typically very small and are usually well established. But in rural areas and especially with large tracts of land, surveys are very important. Most people can’t tell the difference between 10 acres and 12 just by looking, but a surveyor can determine that the property lines are where the descriptions indicate, and that the amount of property actually available is consistent with what the home buyer is paying for. This can also indicate when there are encroachments – other buildings, fences, etc. that are on the property but shouldn’t be there.

First time home buyers may be thinking that the requirements like appraisals, surveys and inspections make the process less than appealing, and you may very well be right. But keep in mind that this is a big financial investment – the biggest most people will ever make. Even if you have a perfect credit rating, a lender is taking a chance on a first time home buyer. Having appraisals, surveys and inspections cane make you as the home buyer and the lender more confident that you’re making a good decision.

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