What is a home appraisal and inspection?

When buying a home, there are important steps that allow you to fully evaluate the property before finalizing the purchase. This process is commonly known as due diligence, which is typically outlined in your sales contract. The due diligence period is meant to give you time to review every aspect of the home and the transaction before closing.

Just as your lender assesses your income, assets, and creditworthiness to approve your mortgage, due diligence gives you, as the buyer, the chance to do your own evaluation of the home. This process may include:

• Home inspection: may identify any structural or maintenance issues.
• Seller disclosures: the seller may be required to provide written details on any known property issues based on federal, state, and local laws.

During this period, the seller takes the home off the market, and you may need to pay earnest money directly to them as compensation. This payment is typically non-refundable unless the seller backs out of the deal or breaches the contract. By completing inspections, reviewing documents, and ensuring the property meets your expectations, you reduce risks and can gain confidence in your investment.

When buying a home, two key evaluations can help ensure you’re making a sound investment: an appraisal and a home inspection. While both involve a professional assessment of the property, they serve different purposes in the homebuying process. Understanding the difference can help you navigate your journey with confidence.

A home inspection is a thorough evaluation of a property's physical condition performed by a professional home inspector. Unlike an appraisal, an inspection is not about determining market value—it's about identifying potential issues with the home. Even though an inspection is not required, it can provide peace of mind and help you avoid unexpected repair costs after moving in.

• A home inspector assesses both the interior and exterior of the property and looks for structural concerns, safety hazards, and potential repair needs.
• While your home inspector should be knowledgeable in current systems and building practices, it may be necessary to engage a specialist which includes, but not limited to, inspecting roofs, pest infestations, radon level, or structural issues.
• The inspection report details issues, such as roofing conditions, electrical or plumbing concerns, and heating or air conditioning systems that may need repair or replacement.
• Based on the report, buyers may be able to negotiate repairs with the seller or request the seller adjust the sales price to account for necessary fixes.
• The cost of a home inspection is usually paid by you, the homebuyer. If you have questions, consult with your real estate agent. 

A home inspection typically takes two to three hours for an on-site evaluation. The exact time depends on factors, such as:

• Property size: larger homes take longer to inspect.
• Home age: older homes may require a more detailed examination.
• Condition of the home: if there are visible issues, the inspector may need extra time to assess them.

Once the inspection is complete, the inspector will usually provide a detailed report to you via email within a few business days.

When purchasing a home, a property inspection is a crucial step in understanding the condition of the property before finalizing your purchase. While Wells Fargo doesn't require a property inspection on every purchase, it is highly recommended that buyers obtain one and make their purchase offer contingent on the results.

An appraisal is an evaluation performed by a licensed appraiser to provide the lender with an estimate of the home’s market value and a detailed description of the property. The lender uses the appraisal to verify the property's value supports the mortgage loan amount.

Key points about appraisals:

• The appraisal provides a detailed description of the property, including its size, condition, location, and comparable home sales in the area.
• If the appraised value is lower than the agreed-upon sales price, it may affect your loan approval or require adjustments to your mortgage terms.
• The lender provides the buyer with a copy of the appraisal report for review.
• The cost of an appraisal is typically covered by the homebuyer.
• If you have concerns or need to dispute the appraisal evaluation, consult your home mortgage consultant for guidance.

On average, the appraisal process usually takes about one week from start to finish. The timeline includes:

• On-site evaluation (up to 2-3 hours): the appraiser visits the home to assess its condition and compare it to similar properties in the area. There are other appraisal methods such as a desktop appraisal that can take less time.
• Report preparation: after the on-site visit, the appraiser analyzes data and submits the report to the lender.
• The lender will then review the appraisal and share the report with you.

To learn more about important steps in purchasing a home, visit our Learning Center article: Important steps in the homebuying process.