June 27, 2022
What is a seller inspection and why should you know what it is before you start looking for a home to buy with an FHA mortgage?
The National Association of Certified Home Inspectors official site says that a seller inspection, sometimes referred to as a pre-listing inspection, is popular in some areas, “…because they virtually eliminate all the pitfalls and hassles associated with waiting to do the home inspection until a buyer is found.”
A seller inspection can tell you (as a buyer) a lot about a home before you decide to make an offer. But why would a seller have an inspection if there’s a risk that a defect or problem might be uncovered that can hurt the seller’s chances to sell the property?
Generally speaking, it’s common sense that any problem with a home that could stop a deal in its tracks will be discovered in the appraisal process or during the borrower-paid inspection (optional but very important) you can schedule during the buying process.
In some cases, a seller might wonder why bother doing an inspection at all? In the case of newer homes, does an inspection even help?
For the buyer, the answer is yes. It helps to see documentation showing a home is still in good condition, and for sellers, this can be viewed as a kind of marketing for the home.
For the buyer, reading the seller inspection report and seeing a defect listed isn’t necessarily a deal-breaker. It could be viewed as a place where negotiations can begin–does the price include an adjustment for repairing the defect?
Does the buyer want a fixer-upper loan to address the issue instead of trying to buy the home with an FHA 203(b) loan which requires an appraisal and corrections prior to loan closing in typical cases?
If so, the issue uncovered in the seller’s inspection may not be a problem. But if you aren’t prepared to negotiate over such issues you may find it tougher to get up to speed, so to speak. Think about how you would approach this issue if it happens to you during your house hunt.
If you anticipate this you can research how other buyers have successfully dealt with the issue in the past. Then you can decide what approach is right for you and not be taken by surprise at a crucial stage in the process.
Seller inspections are not required for FHA home loan approval. Seller inspections are not the same thing as an FHA appraisal and the results of the inspection may not always agree with the appraisal.
But the appraisal is not a tool for the borrower, it’s a tool for the lender to establish the fair market value of the home and ensure it meets MINIMUM standards. It is not meant to be a comprehensive review of the property.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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