Expert: Jessica Bryan - 2/23/2011

Question
QUESTION: hi, does a bank look at your home and then look at the home inspection before they decide to appraise it for the agreed selling price?

ANSWER: Hi Beverly;
The bank doesn't look at the home inspection to make a decision about the appraisal.  The process is that the bank orders an appraisal.  The appraiser provides an evaluation that may or may not agree with the selling price.  An appraisal should be totally impartial and based on comparable  properties in the area. If the appraisal doesn't come out high enough then the bank will adjust the loan price accordingly or not agree to do a loan.

I hope that this answers your question.

Sincerely,
Jessica Bryan

---------- FOLLOW-UP ----------

QUESTION: hi jessica , thanks for your quick reply. that seems so strange to me. what if there are major problems such as foundation or roof that are exspenisve repairs that the appraiser cant see. the bank is loaning on a property that could be actually worth less than the comparables they use because of that. it seems a backwards way to do it, doesnt it?

Answer
Hi Beverly;
Certainly if the bank finds out that a home is structurally unsound they would be less likely to loan on it but it is encouraged for all homes to be inspected and the buyers will find out quickly if there is a problem.  The bank reviews the contract and will know the terms of the sale.  For example, we often write into the contract if, after inspection, there are issues with the home that will cost more than a certain specified amount, then the buyer can cancel the contract.  The bank will follow up with this and the underwriters will review the terms of the contract as well.  So, it is assumed that as a buyer you would not want to owe on a house that is worth less than the loan.

Sincerely,
Jessica Bryan