If you’re planning to buy or sell a home in the months ahead, then it’s important to have an understanding of the many moving parts that will go into a successful real estate transaction – including knowing the differences between the appraisal, the property inspection, and the survey.
All three of these processes help buyers, sellers, and lenders get a better understanding of the property being sold – but they are carried out by different parties, use entirely different methods, and, ultimately, have very unique aims. Nevertheless, these real estate terms are commonly mixed up, even by experienced buyers, sellers, and developers.
Looking for a better understanding of the distinctions when it comes to appraisals vs. inspections vs. surveys in real estate? Let’s explore each of these important concepts in more depth:
Real Estate Appraisals
Broadly speaking, the appraisal is intended to help provide an accurate value for a property on behalf of a mortgage lender, so that the institution can be reassured that it is making a sound investment in issuing a loan to the buyer. Generally, the buyer covers the appraisal as part of their closing costs; the appraisal process is typically required as a condition for receiving a mortgage.
Appraisals are conducted by third-party professionals, who work to determine the monetary value of a property by assessing a number of different factors. The appraiser will look at elements unique to the property itself, while also looking at its comparative market value in relation to other recent home sales and real estate trends. An appraiser will consider elements such as the condition of the property, its location (such as its distance from schools and other desirable community features), and its size and age. Just as importantly, the appraiser will consider comparable recent sales, and the prices of comparable homes in the area.
At the end of the appraisal process, the appraiser will issue a final report stating the appraised value of the property. In some cases, this appraised value report may determine whether or not a loan goes through; lenders may not approve a loan if the appraisal falls short of the list price. In cases like this, though, it is often possible to seek out a second appraisal, or for buyers, sellers, and lenders to develop a strategy that can allow the transaction to move forward.
If the appraisal is intended to determine the value of a home or a piece of property, then the home inspection is meant to provide an assessment of its condition.
A home inspection is carried out by a licensed home inspector, who performs a thorough evaluation of the property and examines the age and condition of the many parts and systems that make it run, including plumbing, electrical, and HVAC. Inspectors will also look for dry rot, mold, issues with the foundation, and countless other problems that could impact the homeowner now or in the future.
The home inspection, then, is meant to help the parties involved in the transaction get a better understanding of the health of the home. If the inspector issues a report with many pressing problems that need to be addressed, the buyer – working with their real estate team, including their broker and real estate attorney – may decide to terminate the sale. In other cases, they could use the results of the inspection as leverage in negotiations, convincing the seller to lower their price or grant a credit toward future repairs. Some sellers will also have their home inspected before they take it to market, in order to suss out problems and make repairs before unforeseen issues have a chance to jeopardize the sale down the line.
Here in Chicagoland, a survey is part and parcel of a typical real estate transaction, and is generally performed as part of the title search process.
With a property survey, a professional surveyor will come to the home and, in essence, draw a map of the land, based on their visual assessment of the territory, along with research into the history of the property, existing maps, and local records. From there, the surveyor will issue what is known as a plat of survey, which notes the boundaries between different parcels of property (to scale), while also identifying key features such as streets, right of way, flood zones, potential easements, and so on.
Having a survey performed is a key part of the sales process, for buyers and sellers alike. Taking a survey of the property helps ensure that the seller has the right to convey the property, and that the seller is fully aware of what they’re buying – boundaries, easements, and all. What’s more, if the new survey reveals discrepancies or issues (such as a difference in lot size, difficulties with access, or unanticipated easements), the buyer may use this as a negotiating chip, or might even back away from the purchase. Generally speaking, the seller’s attorney will order the survey as part of the title search and insurance process.
Moving Your Real Estate Process Forward
In all, considering these different methods for evaluating a property helps serve as an important reminder of just how complex, and costly, the real estate process can be – particularly here in Chicagoland, where our unique marketplace and our one-of-a-kind real estate, zoning, and tax laws make having the right legal and financial insight all the more important.
Whether you are a couple wanting to buy or build a house, a corporation converting commercial properties to residential, or a commercial developer looking to change the Chicago skyline, it can be reassuring to know that you have an experienced and trustworthy partner on your side. That’s where the Gunderson Law Firm can step in.
Our knowledgeable team can assist with a broad range of legal services for real estate, including:
- Residential Real Estate
- Commercial Real Estate
- Purchases and Sales
- 1031 Tax-Free Exchanges
- Mortgage Conveyancing & Advice
- Real Estate Litigation
- Title Insurance
- Title Examinations & Disputes
- Asset Protection / Trusts
- Estate Planning / Wills
- Reverse Mortgages
- Property Development
- Condominium Law
The attorneys and staff of the Gunderson Law Firm possess unparalleled expertise and insight, reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, and insurance industries. In fact, our attorneys are also title insurance agents for several of the top title insurance companies in the world.
From processing purchase and sale agreements and title paperwork, to helping you get through the zoning boards, historical commissions, licensing boards, easement granters, and more with the right papers in the right places, our team can help you make sure you’ve got all the “i’s” dotted and “t’s” crossed correctly, so that your project can move forward as quickly and smoothly as humanly possible.
Have any more questions about any aspect of real estate law in Chicago? Don’t hesitate to give us a call or drop us a line whenever you’re ready to keep the conversation going.