When buying a home there are some industry terms not everyone is familiar with. Further confusion can happen since some of these terms appear to be very similar. Two of these are home appraisals and home inspections. Let’s take a look at what they are and how they differ.
What is a Home Appraisal?
A home appraisal is a process that assesses the fair market value of a home. A trained and licensed appraiser, that knows the local area, should be able to give an accurate assessment of the property’s worth.
The appraiser, not only needs to provide an accurate value, but they need to be unbiased in their finding. To make sure this is the case, they have to provide supporting evidence, comparable sales. Appraisers are regulated and held to a higher standard. If they were to give an incorrect appraisal of a property they’ll be at risk of serious professional consequences.
The home appraiser will use a few methods to get to an accurate result. They’ll visit the property to learn about the condition it is in and what features it has. The plot of land the home sits on, as well as the local area. Even the views from the house will be taken into consideration.
They aren’t interested in the furniture in the home or anything else which isn’t a permanent part of the property. They will look at the number and size of the rooms, as well as the overall condition of the home.
This information is then used to compare the house to other properties. The appraiser will look at similar market data for other homes sold in the local area. This is similar to a comparative market analysis (CMA), which is prepared by real estate agents. It goes further than the CMA, however, and should provide a better prediction of the market value.
A home appraisal is normally required by a lender. They want to know they aren’t loaning more money than the house is worth. If they get this wrong and the homeowner defaults on the mortgage, they’ll never get all of their money back.
What is a Home Inspection?
A home inspection is the best way to determine what condition a property is in. What isn’t working properly, what needs to be replaced and what may need to be replaced in the near future. The inspection should be carried out by a licensed inspector, who is trained and has passed the state board examination.
If the inspector finds problems with the property, and they normally do, this will be added to their report. This information can then be used by the buyer to determine how to proceed with the purchase, which will depend on the contract.
Some contracts will allow buyers to cancel the contract within the inspection period. While others will require the seller to make repairs. Negotiating a repair credit for repairs is often an option in both cases.
The home inspection is a visual check of the structure of the house as well as the heating, air conditioning, plumbing and electrical systems. The foundations, doors, windows and the roof will also be inspected among other checks.
Depending on the location of the property, the age, or other factors, additional inspections may be needed, these include:
- Radon Tests
- Wood Destroying Insect Checks (WDO)
- Water Quality
- Septic Tank Inspection
- Swimming Pool and/or Spas
Some of these may be a standard part of the inspection depending on the location, others will come at an additional charge.
Getting a home inspection is important so buyers don’t end up buying a home they will later come to regret. It is an expense they can avoid, but this isn’t recommended. There are many things to inspect, which means there are several things that could need to be repaired or replaced.Home Appraisal vs Home Inspection: What's the Difference?
What’s the Difference Between Appraisal and Inspection?
While both of these services will involve visiting the home to inspect it, and both are normally paid for by the buyer, there are some important differences. The essential difference is the appraisal is trying to find the value of the home. While the home inspection is trying to find issues with the home. The inspection is a more thorough examination of the home to provide a clearer view of its condition.
Both services will provide a report, though the appraisal report will go to the lender, the buyer can normally ask for a copy. The home inspection report will provide a buyer with a lot more information about the home and give them the confidence to continue with the purchase or not.
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Additional Home Buying Resources
- Home appraisals are a big part of the home buying and selling process, which is why it’s important to understand the appraisal process. Not only can a home appraisal impact a buyer’s financing and their ability to purchase a home it can impact the seller too. If the home didn’t appraise the entire transaction can fall apart leaving the buyer and seller at square one.
- If you plan on investing in real estate you should always get a home inspection. For those who decide to skip it may find their “investment” become a financial burden. When a home inspection is performed the inspector will be able to shed light on the condition of the home and any immediate or future repair/replacement expenses.
- One of the top items on a home buying checklist will be a home inspection, However, there are many other things buyers need to do, like gather important documents for their lender and closing company. Buying a home has a lot of moving parts, but when a buyer is organized and works with a top Realtor it will be a lot easier.
About the Author
Top Wellington Realtor, Michelle Gibson, wrote: “Home Appraisal vs Home Inspection: What’s the Difference?”
Michelle has been specializing in residential real estate since 2001 throughout Wellington Florida and the surrounding area. Whether you’re looking to buy, sell or rent she will guide you through the entire real estate transaction. If you’re ready to put Michelle’s knowledge and expertise to work for you call or e-mail her today.
Areas of service include Wellington, Lake Worth, Royal Palm Beach, Boynton Beach, West Palm Beach, Loxahatchee, Greenacres and more.