What Is A Final Inspection?

A Closer Look At The Final Inspection

You may have heard of an appraisal inspection but what is a final inspection? Keep reading to find out the “second part” of the appraisal process for certain types of appraisals.

For many types of appraisals, there is only one inspection or observation as we like to call it. Because an appraisal is nothing like a home inspection, that term could be somewhat misleading. You can check out the difference between an appraisal and a home inspection here.

Proposed Construction Appraisal

For most appraisals, the appraiser must only visit the property one time. This visit consists of the appraiser collecting information about the property to include in the report.

In addition to filling out an appraisal form, or creating a narrative appraisal report if that is the type of report being done, the appraiser uses the data collected as a basis for their research and analysis. The physical characteristics of the home are noted so that the search criteria the appraiser uses to locate and analyze sales comparables provides the best comps possible.

If a property is not completed, the appraiser must utilize other methods to collect data on what the physical attributes of the house will be. In the appraisal of a proposed house, the appraiser uses house plans and construction specifications to determine what the house will be like after it is built.

This is commonly referred to as a “subject to” appraisal. The opinion of value included in the report is “subject to” completion of the house and when complete it must be the same home noted in the plans and specs.

The completed appraisal is submitted to the bank so that they can make their loan decision based on what the value of the home will be after it is finished. In the appraisal of an existing home, the appraiser includes a floor plan sketch they drew when they were at the property.

In addition to the floor plan sketch of the existing home, there are also pictures and detailed descriptions of the home’s features and materials of construction. Taking such detailed notes allows the appraiser to research and find recent sales of similar homes to use in the appraisal.

Because the appraiser does not have this type of information about a proposed home they use the plans and specs as a guide when researching sales. Because the appraisal value is based on this information it is important that the home be completed as close to these specs as possible.

When the house is completed, the bank typically asks the appraiser to revisit the property and verify that the house is built “per specs”. The lender wants to make sure that their collateral for the loan has not diminished in value and that their loan amount is covered.

Steps Involved

During the final inspection, the appraiser will measure the house to make sure that the square footage does not vary significantly from what was indicated on the plans. There will be some differences due to construction variances, however, it should not be so different that the property is negatively affected.

In addition to verifying that the square footage is similar, the appraiser will also make sure that the floor plan layout is similar. Some changes may have occurred, however, they should not negatively affect the functional layout of the property which could decrease its value. The number of bedrooms and bathrooms should be similar, or at least no less.

The materials noted in the specifications will also be verified to ensure they are not inferior to what was initially reported. Again, there may be some differences but they should not affect the value of the property in a negative way. For example, they may have changed the counters from granite to quartz or some other similar substitution.

In the report, the appraiser will include pictures of the exterior and interior of the property and a new floor plan sketch if it is significantly different. It will be noted if the improvements have been completed in accordance with the requirements and conditions stated in the original appraisal report.

Conclusion

As you can see, a final inspection report is pretty straightforward. The main reason for the report is to let the lender know that the property was built per the plans and specs provided which can help the lender in their due diligence process.

Question

Do you have any other questions related to the final inspection report? If so leave a comment below and we’ll keep the conversation going. As always, thanks for reading.

If you liked this post subscribe by email (or RSS feed).