Inspection and Appraisal Challenges: What Every Homebuyer and Seller Should Know

Inspection and Appraisal Challenges: What Every Home buyers and Seller Should Know

In today’s real estate market, where interest rates are higher --than what we got used to -- and home prices are shifting, inspections and appraisals have become more than just routine steps—they’re critical turning points that can make or break a deal. As a seasoned real estate broker in the competitive So. Cal market, I’ve seen how these processes can cause delays, re-negotiations, and even cancellations when not handled properly.

Here’re thoughts of how to navigate common challenges.

The Home Inspection Hurdle

A home inspection is a buyer’s opportunity to assess the condition of the property before close of escrow. It covers major systems—roof, plumbing, electrical, foundation, HVAC—and un-covers invisible defects.

The Challenge is that even in a multiple offers situation, buyers ought to be diligent -- Inspection reports can reveal costly repairs, prompting re-negotiating for repairs, credits, or price reductions. In fact, over 12% of contracts face delays due to inspection issues according to the National Association of Realtors (NAR).

Common Red Flags:

• Roof damage
• Cracked foundations or drainage issues
• Termite damage or signs of dry rot
• Outdated electrical or plumbing systems

Consider a pre-listing inspection. It gives you the opportunity to fix major issues upfront or price the home accordingly—helping you avoid surprises during escrow.

The Appraisal Gap Dilemma

An appraisal determines the fair market value of the home for the buyer’s lender. It protects the bank from lending more than the property is worth.

The Challenge is that with home prices adjusting and comparable sometimes lagging, appraisals can come in below contract price—especially in higher end markets like ours, where inventory remains tight but buyer demand has become a bit softer than a year ago.

In May of this year, for example, Zillow data showed home values in this area were down 3.2% on average year-over-year. Subsequently, appraisers are adjusting accordingly, even if buyers are willing to pay more.

When This Happens:

• Either the buyer needs to make-up the difference 
• Or, the seller may reduce the price
• Or: both parties may re-negotiate, to prevent the deal from falling through

What I do is: I submit a comprehensive list of comps and recent upgrades ahead of time. I’m proactive and collaborative with the appraiser. In certain cases, I also advise to obtain a 2^nd opinion.

 How to Protect Your Deal

• For Buyers:
  Budget for potential repair costs, and lean on me, as your realtor, to negotiate wisely post-inspection. Also, understand your loan type—FHA and VA loans have stricter property condition requirements.
• For Sellers:
  Keep records of all upgrades and repairs. Be realistic about market value and open to negotiation if an appraisal gap arises.

Final Thoughts

Inspections and appraisals aren’t just boxes to check—they’re pivotal milestones that can un-cover serious issues or reveal opportunities for compromise. 

In a market that’s still adjusting, a smooth escrow often hinges on preparation, transparency, and the right strategy.

If you're planning to buy or sell in the Southern California market, I'm here to help you navigate each step with confidence—and avoid the costly surprises that can derail your deal.

Need advice on how to prepare your home for a smooth inspection or worried about an upcoming appraisal? Let’s talk strategy before you list or write an offer.