What’s the Difference Between an Inspection and an Appraisal?
Both buyers and sellers often assume that real estate appraisals and home inspections are one and the same thing. These processes are linked to every home purchase yet serve different purposes. After reading this
article from Marina at www.evolvedenver.com, a real estate and property management company in Denver, you’ll know the differences between the tasks of appraisers and home inspectors and understand when you will need their services.
Real Estate Appraisal
What is your property’s fair and factual value? That is the main question an appraiser has when visiting your home. Appraisers use a wide variety of techniques and factor in many variables to make their final decision.
Visiting a home allows the appraiser to check for observable value: overall conditions, functionality, size, floor plan, and design along with the surroundings. While some of it is quite subjective, the appraiser does consider numerical data like the selling prices of similar homes, the square footage, and proximity to schools or public infrastructure.
Usually, it’s the lender that requires a home appraisal because knowing the property’s actual value is essential to them. All parties involved get a comprehensive report featuring the home’s value and a detailed overview of how the appraiser exactly came up with the final amount.
The lender uses this report to determine the loan type, amount of down payment, and often even the quoted interest rates. Even if the lender contracts the appraisal company, in most cases, the buyer pays for the service. Regular fees average up to a few hundred dollars and the amount will be added to the closing costs.
Home Inspection
So, what are you really buying? You aren’t only buying a beautiful living room, or a kitchen equipped with fully integrated appliances. Behind the facade, you might be getting a bunch of hidden issues.
Some of these problems are almost impossible to detect without special knowledge and a trained eye. The home inspector takes a look at all of the home’s main areas, including foundation, floors, ceilings, and roof. Close attention is paid to important systems like cooling, electricity, heating, and plumbing.
Try to be present at the inspection. You can ask questions from the inspector while he is carrying out the procedure. The final document is the inspection report that usually contains illustrating photos alongside the narrative text. It’s essential to keep in mind that no inspection will guarantee anything. It’s possible that the property has some deep flaws that the inspector didn’t notice. However, a qualified inspector will probably point out all of the most pressing issues concerning health and safety.
Main Differences
The main differences between an inspection and appraisal is their goals. A home appraisal is about determining the property’s value by focusing on the relevant factors. Though there is some subjectivity, the appraisal mostly focuses on the quantitative data. This value is particularly important to the lender who orders the report.
The home inspection carries the most value to the prospective buyer. When you are buying a home, you want to make sure that there aren’t huge hidden flaws. Home inspection directs attention to the reliability of air conditioning and heating systems, eliminating any safety issues, and making sure that the electrical wiring proves acceptable.
You should be able to use the home inspector’s report to understand the problems at present and even foresee any serious issues coming up in the future. Prevention is the best cure and that applies to housing as well.
Usually, buyers schedule a home inspection before purchasing a property. Considering the actual logistics, a home inspection demands more time at the property. Most appraisers just take a walk through the home and crunch the numbers later on. Depending on the home’s size and potential issues, an inspection might take anywhere between two to four hours.
The appraisal is done after the inspection. When the appraiser finds the value to be lower than the agreed-upon price, the buyer might make a bigger down payment, or the seller could lower the price. As the two processes are different in nature, never trust anyone who offers you a 2-in-1 deal. Inspections and appraisals require two distinct skill sets.
Take-Home Message
A home inspection is not a substitute to a home appraisal or vice-versa. You should schedule a home inspection to get the details on possible health and safety risks alongside any potential repair work. An appraisal is all about the property’s value and the report provides the most useful information to a lender. Both processes help the buyer make better decisions when purchasing a property.
