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Home Inspection vs Appraisal

Today we’re going to compare two parts of the home purchase process. Home inspections and appraisals are both essential parts of a real estate transaction. They also both involve a professional checking out the property. It can be easy to confuse the two, so it seemed worth going into. A few key differences are the purpose of the visit, what they do on the property, and what they leave you with.

A home inspection is a thorough examination of the home’s physical condition. Your inspector will check the home's exterior, interior, and major systems. A Reliable home inspector works for you and nobody else. In addition to giving you items to take back to the seller to discuss, a home inspection also teaches the buyer about their new home. The client of a home inspection is encouraged to come with the inspector to learn the details of the home and discuss items that may need repair or maintenance.

For more about home inspections, check out our home inspection page or our in-depth article.

The lending company usually requires an appraisal because the house serves as collateral for the loan. The bank doesn’t want to lend out more than 80-97%% of what the home is worth and doesn’t want to lose anything in the case of foreclosure. Part of the appraisal happens in person, an appraiser will walk through the home and look at the features and detriments of the property. For example, an appraiser will check the number of bedrooms, bathrooms, and any renovations that could impact the home’s value. Outside their walkthrough, the appraiser will check how comparable properties (comps for short) have sold in the last 90 days.

Both services help uncover potential issues that could affect the sale of the home. Each one helps determine whether to move forward with the purchase, in different ways. If an appraisal comes in well below the asking price, the seller may have to lower the price, or the buyer may need to put more money down upfront. If a home inspection finds major defects or safety concerns, the seller may need to make repairs, or give a credit for the repairs. Otherwise, the buyer will need to factor repair costs into their purchasing decision. The buyer usually pays for both.

While both services involve an examination of the home, the purpose of the visit differs. The appraiser is there to ensure that the price of the home corresponds with its market value. Otherwise, the lender could have problems down the road. The home inspection, on the other hand, focuses on the condition of the home and checks to make sure it can be safely occupied. An appraiser will generally walk the property alone, but an inspector would rather the client be there to ask any and all questions about the home and learn about how to maintain it over time.

An appraiser will write a report about the home’s current market value. A Reliable home inspection report is a fully photographed guide about what to take to the seller, what could pose a safety hazard, and what items need more looking after than others. An appraisal is usually conducted between the buyer and the lender, although it may impact the seller as well. The home inspection, however, is generally between the buyer and the seller.

In summary, an appraisal is about the home’s value, and a home inspection is about the home’s condition. Another way to put it- the appraisal is about the lending bank’s risks, and the home inspection is about the buyer’s risks. Both are very important pieces of real estate transactions and help determine if the purchase is a good idea or not.

If you’re selling your home there are a few steps you can take to enable a smooth appraisal and home inspection process. As a seller you don’t want the home inspection to deter the buyer, or delay the process for too long. To prepare for the inspection, make sure the inspector has access to crawlspaces, the HVAC system, and other major areas of the home. As part of getting your home ready to sell, you may wish to do a few minor repairs for a good impression, and disclosing the paperwork to the buyer can help ensure a smooth inspection. For the appraisal, you want to show the home off to the best advantage. To do that, you may wish to clean the interior and exterior of the home and have permits ready for any upgrades made to the house. If you’re unsure what originally came with the home and what was upgraded later, your county parcel search will turn up what permits exist for the property.

I hope this helps in your home buying and selling and thank you for reading!

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