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

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

In today’s real estate market, where interest rates are high 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 Southern California market, I’ve seen how these processes can cause delays, renegotiations, and even cancellations when not handled properly.

Here’s what buyers and sellers need to understand—and how to navigate common challenges.

🔎 The Home Inspection Hurdle

What It Is:
A home inspection is a buyer’s opportunity to assess the condition of the property before finalizing the purchase. It covers major systems—roof, plumbing, electrical, foundation, HVAC—and uncovers visible defects.

The Challenge:
Even in a seller’s market, today’s buyers are cautious. Inspection reports can reveal costly repairs, prompting demands for credits, repairs, or price reductions. In fact, nearly 15% of contracts face delays due to inspection issues, according to the National Association of Realtors (NAR).

Common Red Flags:

• Roof damage or age nearing replacement
• Cracked foundations or drainage issues
• Termite damage or signs of mold
• Outdated electrical or plumbing systems

Pro Tip for Sellers:
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

What It Is:
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:
With home prices adjusting and comparables sometimes lagging, appraisals can come in below contract price—especially in markets like Studio City, Sherman Oaks, or Encino where inventory remains tight but buyer demand is softer than a year ago.

In May 2025, for example, Zillow data showed home values in Studio City were down 3.2% year-over-year, and appraisers are adjusting accordingly, even if buyers are willing to pay more.

When This Happens:

• The buyer must make up the difference in cash
• The seller may need to reduce the price
• Both parties may renegotiate, or the deal falls through

Pro Tip for Buyers & Agents:
If you suspect the appraisal might be low, submit a comprehensive list of comps and recent upgrades ahead of time. Be proactive and collaborative with the appraiser.

🤝 How to Protect Your Deal

• For Buyers:
  Budget for potential repair costs, and lean on your agent to negotiate wisely post-inspection. 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.
• For Agents:
  Set expectations early. Educate both sides about the possibility of delays or renegotiations, and stay ahead of communication with inspectors, appraisers, and lenders.

Final Thoughts

Inspections and appraisals aren’t just boxes to check—they’re pivotal milestones that can uncover deal-breaking 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 South San Fernando Valley, 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.