Real Estate Law Blog

By Craig Franklin Chambers. Esquire

Vol.1.77  September 22, 2016

The Littleton Lawyer

As a Colorado attorney focusing on residential real estate transactions, real estate and real property law in Littleton, Lakewood, Denver, Highlands Ranch, and Jefferson, Arapahoe, and Douglas  County,  I  often encounter problems with both inspections and appraisals . Many home-buyers are confused as to the difference between the two.

The standard Colorado Real Estate Commission-approved contract provides for the buyer to perform an inspection of the property.  A typical buyer usually performs several inspections, including, without limitation, to a home inspection by a professional home inspector, a radon test, and sewer scope to check the viability of the sewer line. Inspections are usually performed early on in the transaction.

There are no home inspector licenses in Colorado, and home inspectors are not regulated. A home inspector is usually a person with experience in construction who gives you a critical  view of the physical  characteristics  of the home.

Under the terms of the standard contract, the sale is contingent on your subjective satisfaction of the home’s condition; you can terminate the contract based on unsatisfactory conditions, use the condition of the home to negotiate repairs from the Seller or you can waive the inspection requirement,  There are no licensing requirements for home inspectors and what he produces in terms of an inspection report is a checklist indicating the minor and major problems with the home.

The standard Colorado Real Estate contract also has a contingency for the appraisal of the home. The appraisal is usually performed after the home inspection, closer to the closing date. The appraiser is licensed by the Colorado Real Estate Commission, and the appraisal report he provides is performed in accordance with standardized professional guidelines. The appraisal is required by the lender to assure the lender that the lender’s interest is secure in loaning on the home.

Although an appraiser can make conditions on the appraisal regarding the condition of the home as part of the loan process, and although the appraiser views the property, the appraisal is not an in-depth assessment of the condition of the home. The appraiser is only concerned with the overall condition and the market value of the home as based on comparables in the area sold in the past 6 months.

In sum, the inspection is paid for by the buyer to determine if the home’s physical condition is acceptable to the buyer. The appraisal is ordered by the lender to ascertain the value of the home so the lender can give the buyer the loan.