What’s the Difference Between an Inspection and an Appraisal?
Are you buying or selling a home?
You might have already heard about home inspections and appraisals. These are both important steps you need to take before signing a binding agreement, says John Haas of Haas Properties. Many people believe that inspection and appraisal are essentially the same. However, there are major differences between these procedures. In this article, we’ll explore the differences and similarities between an appraisal and a home inspection.
What is a home inspection?
The purpose of a home inspection is checking the property’s overall condition and integrity. In most cases, a buyer pays for this service. That’s because you want to know if a particular property hides damage or serious issues.
Some sellers get a home inspection done before putting their house up for sale. They don’t want to risk surprising people who come to visit for a showing. It’s better for them, in the long run, to fix potential issues beforehand.
Qualified home inspectors do a thorough job. They check all the main areas of a property.
Among other objectives, you would find these points on their checklist:
- Are there any plumbing issues?
- Is the foundation’s integrity in check? How is the structure holding up?
- What about any water damage and resulting mold growth?
- Are household appliances safe for daily use?
- Any excess moisture in the basement, crawl space, or attic?
- What is the status of the roof and chimney?
What is a home appraisal?
A home appraisal ensures the lender that they can get approval for a buyer’s loan. But the information extracted from a home appraisal is important for buyers and sellers too. Upon the completion of a home appraisal, all the parties receive a robust report that contains the major data points about the home. The most important aspect is the home’s value in a dollar amount. When you read this report, you are able to see all the calculations behind the final figure.
Now you may wonder how an appraiser identifies a property’s value.
There are many factors that receive attention for a valid appraisal. Here are some of the top variables under consideration:
- Where is the property located?
- What is the size and condition of the home?
- Are there any unique amenities?
- How does the recent sales data showing similar homes look like?
- How large is the lot size?
- What are the surrounding market conditions?
- How close is the property to education opportunities and various services?
In addition to real estate appraisals, there are bank appraisals as well. These are something more specific to the banking industry. While the appraisers focus on the same property, bank appraisals narrow it down to fair market value and resale comparisons. Buyers usually pay for the appraisal. After this procedure is conducted, the lender uses the report to determine the loan type, down payment amount, and interest rate. The appraisal expense often forms a part of the closing costs.
What are the main differences between appraisals and inspections?
Inspections make sure that the overall conditions in the property are good. Appraisals determine the home’s value. Here are their differences:
- Buyers and sellers contact a home inspector. But appraisals are ordered by lenders.
- Home appraisers mostly work in solitude. Home inspectors are often accompanied by buyers when they walk through the property.
- Appraisers rely on what they see: both data and visual assessment. However, home inspectors may use special devices and tools to make sure there aren’t any hidden issues.
- The result of a home inspection isn’t going to shape the loan amount and terms. Appraisals directly affect the loan terms.
- Home appraisers won’t give out any information before the report is finalized. Home inspectors, on the other hand, can start communicating about the problems on the spot.
- Lenders set home appraisals as a strict requirement. There is no such standard regarding inspections.
- Home inspections focus on the property itself. The inspector doesn’t pay attention to the surroundings. Home appraisers consider the wider context, including near-by services and educational facilities in the area.
In a nutshell: Inspection vs Appraisal
Inspections and appraisals are completely different procedures. While both of these are necessary when buying or selling a home, the aims and considerations have stark differences. Home appraisers determine the value of a home. They look at numerous factors, such as market conditions, property size and location, lot size, and amenities. Home inspections aim to understand the overall condition of the home. A home inspector check for flaws and issues that are hidden or even in plain sight. For example, inspectors look for water damage, structural problems, and faulty plumbing. So, these are the differences between an inspection and an appraisal process. Getting Home Instpection Nashville Services will help you make the right decision if you are searching for a new home.