Did you know that a home appraisal is different from a home inspection? Even though a home appraisal and home inspection have some of the same elements, there are some differences. An appraisal evaluates the value of a home, whereas a home inspection evaluates the condition that the home is currently in. Home inspections and appraisals are your tools to ensuring the home you want to purchase is right for you (financially, and functionally).
A home appraisal is an inspection completed by an unbiased appraiser, who deems the estimated value of the property. They create a report of other properties recently sold in the area, current market trends, and the property’s. According to the National Association of Realtors:
“An appraisal ordered by a lender is for the benefit of the lender to ensure that the collateral they are using to securitize the loan is sufficient. An appraisal is not a home inspection. While all appraisals are valuation services, not all valuation services are appraisals.”
When applying for your mortgage, the appraisal helps determine how much we will lend you, and confirms that the loan amount, and home valuation are aligned. It will help make sure that the lending amount is correct, and the property is not overvalued. This is crucial when it is a seller’s market because the prices of homes might be listed higher than their actual value due to the low demand in available properties.
There are certain costs associated with an appraisal that are determined by the size of the home, the type of home, location, condition of the property, and the amount of work and time required to complete the entire process. This cost is typically part of the closing fees, or the buyer can opt to pay the fee up-front.
According to the National Association of Realtors, the 2nd biggest cause of delay in loan settlements are issues involving the home appraisal. Make sure you understand what an appraisal is and that the report is accurate. If you have any questions, contact our team today!
Home Inspections are typically completed after the offer you made on a property has been accepted. Talk to your real estate agent about the pros and cons of making contingent offer based upon a passed home inspection. While this could help you renegotiate if challenges arise, in a seller’s market, the contingent offer could be the reason why the seller rejects your offer.
A home inspector will determine the condition of the home, if it is safe, and its current state. If there is anything found during an inspection, such a leaky roof, as the buyer, you can discuss repairs with the seller prior to closing.
According to the American Society of Home Inspectors, below is a list of items an inspector will review to ensure there aren’t any issues:
- Heating system
- Central air conditioning system (temperature permitting)
- Interior plumbing and electrical systems
- Attic, including visible insulation
- Windows and doors
- Structural components
Uncovering vulnerable systems in your home can help you make post-closing decisions to protect your home (i.e. home warranties), and help you plan for any future repairs or renovations.
Typically, the buyer will pay for the home inspection but that could be negotiated in your offer. Discuss your options with your trusted real estate agent. In some instances, the seller will have the home inspected prior to listing it on the market. In that instance, make sure you know how recent the inspection was done before making any offers if that is the case.
The Bottom Line
While both an appraiser and inspector will be looking at similar features of the property, they are evaluating for different reasons. Make sure you know what each report states. If you have any questions during the process, contact us or your real estate agent.