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Why is a Home Buyer Inspection Required?

Real Estate

Most real estate buyers but their home using a mortgage, and as such work with a bank or other mortgage lender. In almost every situation, the bank will require a home buyer inspection, which the home buyer is obligated to pay for as part of his closing costs and the mortgage process. Why, though, is a home buyer inspection required by lending institutions before they will lend you money to buy a home?

Why is a Home Buyer Inspection Required?

During a home buyer inspection, a licensed and certified home inspector comes to the home the buyer is thinking about buying. He does a thorough inspection, which lasts anywhere between one hour and six or seven hours, depending on the size of the home and the thoroughness of the inspection.

While at the home, the inspector checks all areas and aspects of the house for problems. He usually works from the attic to the basement or vice versa, checking the foundation, the beams, the boards, the walls, the outlets, the heating system and vents, any fireplaces, and any other interior and exterior aspects of the home. During the home buyer inspection, the inspector is generally checking for anything that could be costly to fix, such as foundation problems, roof problems, issues with the heating or cooling system, or the presence of asbestos, lead paint or mold.

Banks or other lending institutions require such an inspection be performed before they lend money for the property because the inspection allows them to make sure their investment is supported by collateral. Mortgages are secured loans, which means that the bank lends money but holds title to the home itself. The home acts as collateral or security on the loan. Therefore, the home must be worth at least as much as the bank lends to the buyer, in order to serve as sufficient security.

While an appraisal gives an indication of what the market value of a home is, major structural defects or other related issues could lower the value of a home dramatically, especially if it will cost great deal to fix the issue. A home buyer inspection identifies these issues so the bank and buyer can be aware up front of anything that could cost a lot to fix or lower the houses value. Usually, any offer a buyer makes is contingent on a home passing the home buyer inspection, so a buyer does have an out- or the opportunity to lower his offer- if the home buyer inspection turns up problems. A home buyer inspection is thus a safeguard against financial damages that could result from unknowingly buying a house that is in poor condition.

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