Both an inspection and an appraisal are typically part of the process when you’re buying or selling a home in Vermont. There are some overlaps, but in general, they are two different aspects, performed by two different professionals, for two different purposes.
Inspection
A property inspection is done for the benefit of the buyer. A licensed inspector will go through the property, and look at everything. Roof, insulation, wiring, plumbing, appliances, structure, windows, exterior, etc. Everything.
Well, maybe not everything. You may still want to have specialists take a look. Heating systems, septic systems, roofs, and some other systems sometimes call for a separate contractor to weigh in.
Depending on the size, age, and complexity of the property, this can take anywhere from 2-4 hours. Inspections usually schedule within two weeks of getting into contract, and the reports are completed in just a couple of days. Pretty quick turnaround. Buyers are always encouraged to be present at the inspection. Wear comfy shoes and maybe bring a snack.
You get to pick your inspector, and you get to talk with them.
The inspection will scare the heck out of you. Imagine if your doctor spent four hours running tests and examining. Or if your partner spent four hours talking about everything that’s not perfect about you. Ouch. Take a breath, you’ve got a Realtor to walk you through it. And there’s no such thing as a perfect house.
The purpose of the inspection is to give you information, and to try to uncover any unknown issues with the house.
If you have an inspection contingency, then you can typically either terminate the contract, proceed as planned, or try to renegotiate to get some items resolved. A seller doesn’t have to fix anything, or give any money. Often they do, to keep a sale moving forward. But they don’t have to.
There’s no such thing as a passed or failed inspection. If it’s satisfactory to you, you’re good. Typically the inspection report would not go to a lender. It’s very rare for a lender to ask to see the report, and if they do, you should talk with your Realtor before sharing. It’s unlikely that the lender really wants the whole report.
Appraisal
An appraisal is done for the benefit of the bank. It seems as if it’s for the benefit of the buyer. But really, it’s making sure the bank doesn’t loan more than a property is worth. A licensed appraiser will go through the property, and then make a valuation based on other recent “comparable” sales. Appraisals are quick, often 30 minutes or less, and buyers are rarely present for the appraisal.. But it can take weeks to get scheduled, and weeks to get the report.
You don’t get to pick your appraiser, and you usually don’t get to talk to them.
When there are delays in closing, it’s almost always because the appraisal couldn’t be completed or the report submitted to the lender on time.
The appraisal will give a valuation. Generally, if the value is at least what you’re paying, then the bank is satisfied. If the appraised value is above the contract price, then the buyer is happy.
If the appraised value is below the contract price, your Green Light Real Estate agent has several strategies that can help bridge the gap. You’re not in this alone!
While the appraisal seems to be all about the value, there are some gray areas. In the lending world, they’re called “overlays”.
A lender may ask an appraiser to comment on the condition of the house. A common overlay is for FHA, RD, and VA loans. The appraiser will look for particular electrical upgrades, handrails, and the condition of paint. If an appraiser notes those, that’s not informational. Those items have to be repaired/upgraded. Either the seller or the buyer can do that, it makes no difference to the appraiser or the lender.
There seem to be no other hard rules about what can be an overlay, and that can be frustrating. The appraisal report can come in just days before a scheduled closing, and require substantial repairs. That’s almost certainly going to delay the closing, or possibly cause the sale to fall apart.
Our advice for buyers is to have regular contact with their lender, and lean heavily on them to get the appraisal ordered and submitted. Even better is to talk with the lender up front and ask how far out they’re booking appraisals, and how often they have delays. That reduces the chances of a delay.
Also bigger down payments also tend to have fewer overlays. So, if you can put 10% down instead of 3.5%, you might want to do that.
Nearly every sale that uses a loan will have an appraisal. The more prepared you are for, and the more you know about the process, the more smoothly things go. And of course, having a skilled Green Light Real Estate agent on your side gives you a huge advantage
| Inspection | Appraisal | |
| Required for a loan | No | Yes |
| Works for the buyer or seller | No | No |
| Buyer can pick who they use | Yes | No |
| Determines value | No | Yes |
| Provides information | Yes | Yes |
| Provides requirements | No | Yes |
| Report goes to bank | No | Yes |
| Easy to schedule | Yes | No |
| Buyer pays for | Yes | Yes |
| Can "Fail" | No | Yes |
When you're trying to buy or sell a house in Central Vermont, it is crucial to have as much information as possible in order to get the best price and prevent expensive surprises. At Green Light Real Estate, our agents assist you with this process every step of the way. Call us today at 802-225-6425 or email us at info@greenlight-realestate.com.