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When considering the purchase of an existing property, you will run into two important elements: Home Inspections and Home Appraisals.

Home Inspections: Buyers assume that the home they are interested in is in good shape. Some home flaws are easy to discern, such as the state of carpeting or paint on walls, but other major issues, such as electrical wiring, plumbing systems and foundation stability usually require a physical inspection by a knowledgeable person to determine soundness. When inspections reveal items needing repair, buyers ask sellers to either repair the flaws or to credit them money back so that they can fix the problem themselves.

Home Appraisals: Home appraisals tell you how much a home is worth, regardless of its asking price. Historically, mortgage lenders prefer to not fund more than 80 percent of the market value of a home. However, there are instances where certain loans will finance up to 100%.

When buyers and sellers agree to a sales price on a home, lenders do not automatically agree to provide a mortgage based on that number. The lender bases the amount it will lend largely on the appraisal. This means that if a home appraises for less than the purchase offer, the buyer will need to come up with the money to cover the difference.

Both home inspections and appraisals have the capacity to derail home purchases. Low appraisals sometimes sink loan approvals and disastrous home inspection reports might cause buyers to rethink purchase offers..