Once you sign a home purchase agreement, a flurry of underwriting and inspection activity begins. For buyers unfamiliar with the process, it can prove both confusing and frustrating. Buyers sometimes confuse a home inspection with an appraisal. While both typically involve someone inspecting the home, the processes originate through different channels and are not necessarily subject to the same time period.
Home Inspection Period
Real estate practices can vary significantly depending on where you live. Some purchase agreements contain clauses that specify a mandated home inspection, complete with a time frame for completion. Other buyers may need to write an inspection clause into the purchase agreement. Buyers and sellers can negotiate a completion date. Home inspectors work directly for buyers to provide them detailed information about the home’s structure, mechanical systems and overall condition. Inspectors point out problems and recommend repairs as necessary. Buyers can use that information to request repairs or price adjustments. The home inspector does not estimate the home’s value.
Function of an Appraisal
Appraisers work for the lender to verify the home’s market value and marketability in case the borrower defaults on the loan. FHA appraisers perform a cursory inspection to assure FHA that the home meets minimum health and safety standards. Loan approval depends on the completion of the appraisal. The appraisal time period depends on the underwriting process, when the financial institution orders the appraisal, when the appraiser can arrange a viewing with the homeowner and the time required to complete research following the home visit.
Each bank establishes an underwriting process with guidelines for the general ordering of events. The loan application requires borrowers to assemble information about employment, bank accounts and pay stubs. Once you submit the application and supporting documents, mortgage processors validate the information you provide. The time frame the processor requires can depend on the current workload and the efficiency of the assigned processor. Somewhere in the course of the processor’s work, she orders an appraisal based on the procedures the bank put in place. Often the order is placed with an appraisal management company, or AMC, which forwards the order to an appraiser in your area. AMCs establish their own procedural guidelines, so the order may not immediately reach an appraiser. Because of the many variables in the underwriting process, the appraiser may complete the appraisal before, during or after the home inspection period.
Appraisers schedule a home visit at the homeowner’s convenience. After the home visit, appraisers research public records, legal records, multiple listing services and conduct interviews as part of their analysis. The time frame for completing the report depends on how quickly various offices or individuals respond to inquiries. Once the appraiser finishes the report, she submits it to the appraisal management company. Frequently the AMC reviews the report before it forwards the appraisal to the underwriter.