Determining the Value of Your Home
One of the first steps you need to take when selling your home is to determine a fair sales price, reflecting any appreciation or depreciation. The purpose of an appraisal is to determine the property's market value, defined as "the most probable price which a property should bring in a competitive and open market under all conditions."
There are two general methods of appraising property. The most common approach is the Cost Approach which uses the theory that if you had to build your home today with new materials, it would cost this amount. For example, if you bought a new home in 1983 for $76,000 and you wanted to have it appraised for sale today, an appraiser would figure out how much it would cost to build a similarly sized structure using new materials. The new construction price is then lowered, realizing the materials used to construct your home are not new but twelve years old.
Another method used to calculate the worth of your home is the Comparative Market Analysis (CMA). This approach compares your home to a minimum of three similar homes sold recently in that neighborhood. By analyzing similar homes and what they sold for, an appraiser can accurately predict your home's sale price. For example, three homes very similar yours sold for $276,000, $279,000 and $278,500. However, you feel your home could sell for $285,000. An appraiser would then question why your home is worth $6,000 more than the homes he previously looked at. If your home had additional items that would bring its price to $285,000, then the appraiser might agree with you and would raise the value of your property by adding in those features.
In 1991, the Hawaii Legislature passed mandatory educational requirements for appraisers to make sure minimum appraisal standards were set. By passing an examination, an appraiser can be State Certified. Some lending institutions will only accept appraisals completed by State Certified appraisers. Also most lending institutions will accept appraisals up to 120 days after completion.
Generally, a building inspection is a comprehensive investigation of a home to find out if there are any defects. While an appraisal would reveal the value of a home, the building inspection goes much more in depth to reveal potential problems with any facet. A building inspector generally would look at the following areas:
Electrical - Check receptacles in all rooms for proper grounding and the five most probable wiring defects, and note the hazards found.
Roof - visual inspection of roof covering condition and defects. Inspect skylights, flashings, gutters, chimney shaft and damper operation. Inspect chimney spark arrestor, cap and hood.
Attic - check accessible underside of roof covering for water penetration, visible wiring hazards, ventilation, insulation and skylight chutes.
Water Penetration - check all interior ceilings, walls and baseboards.
Plumbing - shower, bathtub and sink drains, commodes and components, hot and cold water plumbing, tiles, grouting, water penetration and faucet operation.
Air Conditioning - check all central A/C systems and wall units for function and operation; check all supply and return vents for correct operation. Checking of wall or window units are usually not part of the inspection.
Heating System - check all central heating systems and wall units for function and operation; check all supply and return vents for correct operation.
Appliances - thoroughly check each built-in appliance for component operation, proper electrical grounding, major defects in operation and control. Although checking of appliances is not required by the American Society of Home Inspectors (ASHI), many inspectors will include appliances. However, proper electrical grounding is not checked if the outlet is not accessible.
Hot Water Heater - inspect for lower cabinet leaks and signs of rust.
Swimming Pool/Spa - filter and circulation pump, surface plumbing leaks, sweep, pump, ladder, diving board, lighting and gauges. (Usually, not done by home inspectors, but by swimming pool specialists.)
Sprinkler Systems - Check sprinkler heads and pump operation.
Security Systems - This is not included in the home inspection.
Docks, Davits and Seawalls - These items may or may not be included in the inspection and the inspector will check for defects only, not for structural integrity.
The cost of a building inspection varies depending on the square footage and amenities and not on the sales price of the property. This inspection is based on the professionalism of the individual inspector and may vary from one representative to the next. You should call the inspector to confirm exactly what he will be checking during inspection. The protection you gain from a building inspection is merely another layer of support that can prevent you from making a mistake when purchasing real estate.