If you’re planning to buy a house, your real estate agent has probably told you that you should have it appraised and inspected. Although the appraisal and inspection are similar in some respects, they have different purposes and reveal different information.
What Is an Appraisal?
An appraisal is an independent assessment of the fair market value of a property. A lender will typically require an appraisal before approving a mortgage because it doesn’t want to loan a buyer more money than a house is worth. A lender may arrange the appraisal, but the appraiser must assess the value of a property without influence from the lender.
An appraiser will walk through the house and look at things such as the number of bedrooms and bathrooms, the sizes of rooms and major systems. The appraiser will compare the house to comparable ones nearby that have sold recently and consider information about the surrounding community, such as the quality of local schools and the crime rate, to determine the house’s value. The appraiser will issue a report detailing the reasons for the assessed property value.
As a buyer, you will most likely have to pay for an appraisal, but the cost is worth it. If the appraised value is lower than the seller’s asking price, you can decide whether to renegotiate the price, pay more out of pocket or walk away. The appraised value of the home can also affect property tax assessments.
What Is an Inspection?
A home inspection is an in-depth look at a house’s features. An inspector will look at the roof; foundation; plumbing, electrical and HVAC systems; appliances; and other features and note any serious problems in a report. A home inspection takes longer than an appraisal because an inspector conducts a much more thorough examination of a property.
You should schedule an inspection before deciding whether to buy a home. The goal of an inspection is to provide an accurate assessment of the condition of a house so the buyer can make an informed decision on whether to go ahead with the purchase, request repairs as a condition of sale or walk away.
A buyer generally pays for an inspection, but sometimes a seller pays. In some cases, a seller has a house inspected before putting it on the market to give prospective buyers confidence and to speed the process along.
Understand the Key Differences Between an Appraisal and an Inspection
An appraisal can evaluate a property’s value by comparing it to others in the area, but an inspection can reveal more detailed information about the condition of a specific house. A lender requires an appraisal, but not an inspection. Both are important for buyers since they provide different information. An appraisal and inspection should not be performed by the same person, since they require different training and skills. If you have any questions about either process, talk to your real estate agent.
