01/05/2024
A common misconception that home appraisals and home inspections are “essentially the same thing.” In reality, they are very different—but equally important in the home buying or selling process.
A home inspection is a thorough investigation into the condition of the property and reveals any repairs that need to be made. The key difference between an appraisal and inspection is that the appraisal focuses on the home’s value, while the inspection focuses on the home’s condition. Unlike a home appraisal, a home inspection is usually optional. However, in some cases a lender or loan program may require a home inspection as part of your mortgage application.
Once a buyer has made an offer, they have the option to hire a home inspector to visit the home and perform an inspection. A home inspection is a tool that can protect the buyer, and the results give a buyer the opportunity to decide if they want to walk away and find another home to purchase, buy the house “as-is” or attempt to negotiate with the seller and hold them responsible for the repairs before the home is officially sold. Generally, the fee for a home inspection is between $300 and $500, and is based on a number of factors, including the home’s size and where it’s located.
A home inspection includes:
An evaluation of the home’s structure and utility systems like plumbing, electrical, water and heat
An evaluation of the home’s interior and exterior structures
Identification of needed repairs
A home appraisal is an unbiased professional opinion of a home’s value. When purchasing a home, an appraisal determines if the contract price is appropriate by evaluating its condition, location, and features.
To accurately conclude the property’s value, the appraisal process consists of internal research and a visual interior and exterior inspection of the home. An appraiser will look at recent sales of similar properties nearby, as well as current market trends and conditions. They will also take into consideration details of the home, including its size, condition, floor plan, and amenities.
Although appraisers provide valuable information to buyers and sellers (ie: they can help homebuyers avoid overpaying for homes), their primary mission is to protect lenders. Lenders want to make sure that homeowners are not overborrowing as the home will serve as collateral for the mortgage. Therefore, to avoid owning overpriced properties, lenders require an appraisal before giving the buyer a loan approval.