Buying a home is an exciting process, but it also involves many steps and costs. Two significant expenses that come up during the home buying process are the home inspection and appraisal fees. When budgeting for a home purchase, it’s important to understand who is responsible for covering these fees and factor them into your overall costs. In this blog post, we’ll break down who typically pays for home inspections and appraisals.
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Home Inspection Fees
A home inspection is strongly recommended for all home buyers to evaluate the condition of the home prior to purchase. Home inspections are typically paid for by the home buyer.
The home inspection fee can range from $300 to $500 on average, depending on the size of the home, location, and the scope of the inspection. In some cases, sellers may offer to cover the cost of the inspection or offer a credit to the buyer to cover this expense. However, this is not common practice in most real estate transactions.
As the buyer, the home inspection is intended to provide you with objective information about the home’s condition to make an informed purchasing decision. Since the purpose of the inspection benefits the buyer, expect that the inspection fee will be your responsibility as the buyer.
When selecting a home inspector, look for a certified professional inspector who will provide a detailed inspection report. Be wary of any inspector recommend by your real estate agent, as you want an impartial third-party perspective. A reputable home inspection company like Certified Home Inspection Company Houston will give you a thorough evaluation of the home’s major systems and components.
Appraisal Fees
The home appraisal is primarily for the benefit of the lender to determine if the home’s value supports the amount of the mortgage loan. Since the appraisal protects the interests of the lender, the appraisal fee is typically paid by the home buyer.
Appraisal fees often range from $300 to $500, though the cost can be higher for larger homes or in metro areas. The appraisal cost depends on the appraisal company, the size of the home, and geographic location. As the buyer, you should expect to cover the cost of the appraisal fee at the time of closing.
In some cases, the seller may agree to pay for the home appraisal or offer an appraisal credit. This is more common in housing markets where home values are declining or the home has unique features that make it difficult to appraise. Discuss whether the seller will pay for the appraisal with your real estate agent.
As the buyer, you can shop around and select a qualified independent appraiser, such as Certified Home Inspection Company Houston, to conduct the home valuation. Lenders also maintain a list of approved appraisers you can choose from.
Closing Costs Breakdown
When budgeting for your home purchase, factor in the home inspection and appraisal fees in your closing costs estimate. Here is a breakdown of typical closing costs:
- Home inspection: $300 to $500
- Appraisal fee: $300 to $500
- Origination fees: 1% to 1.5% of the loan amount
- Points: 0 to 2% of the loan amount
- Title fees: $500 to $1,500
- Taxes and insurance: Varies based on location and property value
- Other fees: (credit report, flood cert, recording fees) $300 to $1,000
Closing costs can range from 2% to 5% of the home’s purchase price. Get an estimate of the full closing costs from your lender early in the home buying process, so you know how much cash to have on hand. Also have an emergency fund ready in case any unexpected repairs are needed after your home inspection.
When to Get an Inspection and Appraisal
Home inspections and appraisals typically take place in the final stages of the home buying process after the buyer’s offer is approve.
The standard order of operations is:
- Buyer views and submits offer on the home
- Seller accepts buyer’s offer
- Buyer deposits earnest money with seller’s agent
- Contingencies are added to the purchase contract (home inspection and appraisal)
- Buyer chooses and pays for home inspection
- Inspector examines home and provides report to buyer
- Buyer requests repairs from seller based on inspection findings
- Buyer selects and pays for appraiser
- Appraiser values home for lender
- Loan is approved and closing date is set
Aim to get the home inspection complete within the first 1-2 weeks of having an accept offer, follow by the appraisal around 2-3 weeks after acceptance. This timeline allows you to request repairs or potentially back out based on new property insights from the inspection and appraisal.
Pay Attention to the Fine Print
When reviewing your purchase contract, pay close attention to the clauses about the home inspection and appraisal to understand your financial obligations. Don’t hesitate to ask your real estate agent to clarify any confusing language.
Some key questions to ask:
- Who is responsible for paying for the home inspection and appraisal?
- Are there any cost-sharing agreements with the seller?
- What is the deadline for completing the inspection and appraisal?
- Can I back out if problems are found or if the appraisal is low?
While the upfront costs may seem high, an inspection and appraisal are extremely worthwhile. A thorough evaluation of the home before closing can save you from costly surprises and repairs down the road. Partner with reputable professionals like Certified Home Inspection Company Houston to make the process smooth and give you added peace of mind.
Bottom Line
While most buyers end up covering the costs for the home inspection and appraisal, these fees are well worth it. A detailed inspection report from a company like Certified Home Inspection Company Houston will help you make a wise investment in your new home by bringing to light any underlying issues that need repair. And the appraisal offers protection for you and your lender on the home’s market value. Factor these critical steps into your home buying budget so there are no surprises at closing time.
A Wise Investment
Home inspections and appraisals are expenses you hope to only pay once when buying a home. Though inspectors and appraisers charge for their services, consider their fees a wise investment during such a major purchase.
A thorough home inspection protects your financial interests and provides peace of mind about the home’s physical and structural integrity. Appraisals give an objective valuation of the property to ensure you don’t overpay.
Look at inspection and appraisal costs as necessary steps to make an informed decision and avoid big surprises down the road. Paying a few hundred dollars upfront can potentially save you thousands over time and give you confidence as a smart home buyer.
Some final tips on inspections and appraisals:
- Research inspectors thoroughly and read reviews before selecting one. Verify licensing and certifications.
- Shop around for competitive rates, but don’t choose an inspector based on price alone.
- Schedule the inspection early in the home buying process so you can walk away or negotiate repairs if needed.
- Provide the appraiser with all the details about home upgrades, renovations or repairs.
- Thoroughly review the inspection and appraisal reports and get any questions answered.
- Negotiate with the seller over any inspection concerns, not just appraised value.
For most buyers, covering the home inspection and appraisal costs is money well spent. Doing your due diligence protects your interests and can save you from buying a headache. Partner with qualified professionals and use their objective reports to make a confident decision.
