I wrote this blog post a couple of years ago, but the topic bears another look. In this updated post, we’ll look at what a final inspection is, and what steps you can take to make the most of the appraiser’s return visit.
Just because the appraisal has been completed and sent in to the bank, it doesn’t mean you’re clear to close. Your loan officer will look closely at the report to see if there are any conditions of the appraisal, and let you know. There might be repairs, and someone is going to have to fix them. Maybe a contractor will have to inspect the roof for possible damage before you can close. If you’re financing a manufactured home through the FHA, you’ll need a structural engineer’s report. There’s a host of items that may need to be taken care of before closing – any of which could cause delays. Thankfully, there are a few things you can do to move the process along, and ensure that the repairs are complete when the appraiser comes back.
First, let’s look at why a final inspection is even required. Most of our final inspections are done because either (1) the home is new or being remodeled; or (2) the home has FHA or other deficiencies.
When a home is being built or renovated, appraisers often complete an appraisal subject-to the home (or renovations to the home) being finished. We base our opinion of value on the hypothetical condition that the home will actually be built/rehabbed just like the builder or homeowner said it would be. To check and make sure everything was built according to plans, the lender usually sends the appraiser back out after the home is complete, to do a final inspection. At this point, the appraiser checks the original appraisal, plans & specs, and all other relevant information to make sure it is complete, and built per plans.
Much more common, though, are property deficiencies. All government loan programs have specific appraisal guidelines that usually go above and beyond what is typically required in a traditional, conventional loan. I’ve blogged about some of those items here. If the appraiser notes any deficiencies, the appraisal is then completed subject-to repairs or re-inspection. Once those repairs are complete, the appraiser is called back out to verify that the home now meets guidelines.
I haven’t met anyone who loves the idea of the appraiser coming back out for a final inspection. Hate it as much as you like, it’s just part of the process. However, it doesn’t have to be terrible. Here are three tips for getting through the process quickly and successfully.
- Read carefully. The appraiser should clearly spell out what repairs are to be completed, or indicate that the appraisal is subject to plans and specs (for new construction or remodel). If there are any specific conditions, read those carefully. If a repair needs to be done in a particular fashion, you’ll need to make sure you follow the appraiser’s instructions. Look at the photographs included in the report for guidance. Don’t just assume you know how to remedy the deficiency, as this could lead to a second final inspection if not done correctly.
- Communicate clearly. If you’re a Realtor or a loan officer, this means that you communicate to the buyer/seller the specific instructions found in the appraisal. Some lenders will copy and paste portions of the appraisal and send that to the buyer/seller. That’s a great idea! If you’re the Realtor, you’re in the middle where communication often breaks down. So make sure you know exactly what is being required, and that you relay that information very clearly to your seller or purchaser. And, if anyone has a question, or needs something clarified, call the appraiser! We love to help, and if we can clarify the conditions we made in our appraisal, we’ll be happy to do so!
- Plan accordingly. This one is tricky. When should you notify the appraiser that the repairs are complete? Or, if you’re a builder, when should you let the bank know to send out the appraiser for the final inspection? My advice is to make that call early. Communicate with the lender that the repairs will be done on xxx day, and if you can, give the bank as much notice as possible. Why? Because contrary to popular opinion, an appraiser usually can’t just drop everything and run out to the property to do a final inspection. We have days and sometimes weeks of appraisals scheduled already, and sometimes it can be tough to fit in a final inspection. So here’s an example: You’re a builder and the home is nearing completion. You know for a fact that the home will be done and ready for the appraiser in seven days. Call the bank today. Tell them to order the final inspection, but have the appraiser plan on going out to the property in seven days. That way, the appraiser gets it on the calendar and can call the builder the day before, just to make sure everything has been done. Easy! The same can be said for repairs. If you know the peeling paint will be repaired in a few days, go ahead and make that call to the bank and have them relay the information to the appraiser.
[bctt tweet=”The final inspection process can be confusing, time-consuming, and frustrating. But by reading, communicating, and planning well, the final inspection can be completed easily and quickly, so you can get to closing sooner. ” username=”RiverfrontApp”]
If you have any questions about the final inspection process, or about the appraisal process in general, feel free to give us a call anytime!
Helping homeowners navigate the appraisal process,
Ryan Bays, SRA, AI-RRS