What Is A Final Inspection?

A Closer Look At The Final Inspection

You may have heard of an appraisal inspection but what is a final inspection? Keep reading to find out the “second part” of the appraisal process for certain types of appraisals.

What Is A Final Appraisal Inspection

For many types of appraisals, there is only one inspection or observation as we like to call it. Because an appraisal is nothing like a home inspection, that term could be somewhat misleading. You can check out the difference between an appraisal and a home inspection here.

Proposed Construction Appraisal

For most appraisals, the appraiser must only visit the property one time. This visit consists of the appraiser collecting information about the property to include in the report.

In addition to filling out an appraisal form, or creating a narrative appraisal report if that is the type of report being done, the appraiser uses the data collected as a basis for their research and analysis. The physical characteristics of the home are noted so that the search criteria the appraiser uses to locate and analyze sales comparables provides the best comps possible.

If a property is not completed, the appraiser must utilize other methods to collect data on what the physical attributes of the house will be. In the appraisal of a proposed house, the appraiser uses house plans and construction specifications to determine what the house will be like after it is built.

This is commonly referred to as a “subject to” appraisal. The opinion of value included in the report is “subject to” completion of the house and when complete it must be the same home noted in the plans and specs.

The completed appraisal is submitted to the bank so that they can make their loan decision based on what the value of the home will be after it is finished. In the appraisal of an existing home, the appraiser includes a floor plan sketch they drew when they were at the property.

In addition to the floor plan sketch of the existing home, there are also pictures and detailed descriptions of the home’s features and materials of construction. Taking such detailed notes allows the appraiser to research and find recent sales of similar homes to use in the appraisal.

Because the appraiser does not have this type of information about a proposed home they use the plans and specs as a guide when researching sales. Because the appraisal value is based on this information it is important that the home be completed as close to these specs as possible.

When the house is completed, the bank typically asks the appraiser to revisit the property and verify that the house is built “per specs”. The lender wants to make sure that their collateral for the loan has not diminished in value and that their loan amount is covered.

Steps Involved

During the final inspection, the appraiser will measure the house to make sure that the square footage does not vary significantly from what was indicated on the plans. There will be some differences due to construction variances, however, it should not be so different that the property is negatively affected.

In addition to verifying that the square footage is similar, the appraiser will also make sure that the floor plan layout is similar. Some changes may have occurred, however, they should not negatively affect the functional layout of the property which could decrease its value. The number of bedrooms and bathrooms should be similar, or at least no less.

The materials noted in the specifications will also be verified to ensure they are not inferior to what was initially reported. Again, there may be some differences but they should not affect the value of the property in a negative way. For example, they may have changed the counters from granite to quartz or some other similar substitution.

In the report, the appraiser will include pictures of the exterior and interior of the property and a new floor plan sketch if it is significantly different. It will be noted if the improvements have been completed in accordance with the requirements and conditions stated in the original appraisal report.


As you can see, a final inspection report is pretty straightforward. The main reason for the report is to let the lender know that the property was built per the plans and specs provided which can help the lender in their due diligence process.


Do you have any other questions related to the final inspection report? If so leave a comment below and we’ll keep the conversation going. As always, thanks for reading.

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  1. Alexander Wilson says

    Is an appraiser allowed to drop the estimated price from the initial appraisal in the final inspection based on the overall real estate market (without showing new comps); even if the conditions were all met from the initial?

    • That is an interesting question. The form that a final inspection is reported on has two different uses. One is for an appraisal update where you would report if you thought the value was different that when it was originally appraised. The other is to report whether requirements noted in the original appraisal were met. I personally have never done both of these on a report. I have either done the appraisal update or the final inspection but never both. If you were to do both it would be possible that the conditions were met but due to a change in the market the value has changed. The form shows that if the value has declined the appraiser must have supporting evidence of this. So the appraiser has to at least have this information in their file. If significant time has passed between when the original appraisal was performed and the house was finished there could have been changes in the market that would alter the original value.

  2. It’s been a bit since I’ve done “subject to” in my world. I’ve been mostly an “as is” guy lately. Hope all is well Tom.

  3. Lawrence Fenimore says

    Might be good to also talk about a final FHA inspection and the FHA HUD 4000.1 Handbook.
    Who pays for this inspection and why and what the purpose is especially. Of course one must keep in mind we are not home inspectors as you stated by FHA representatives that search only cursory health and safety issues this helps all parties involved from danger and it also helps secure the FHA insured loan where by the resident to remain somewhat safer and healthier
    from possible toxins like mild or fried asbestos and so on. So when you apply for an FHA loan
    You are really getting a good bargain. This inspection is however not a Home Inspection by a qualified certified state inspector but it is pretty
    good to have a qualified FHA appraiser apply a professional 2nd set of eyes to what one is buying and selling. Tom you can pick up from here since I am only give some highlights for you to put your magic to,
    Thank you Tom


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