There are two home assessment procedures that you may encounter when buying or selling a property. These procedures are a home inspection and an appraisal.
Although many people know these terms, they often find them confusing. Some people believe that since home inspections and appraisals are a form of assessment, there is no need to perform both when trying to buy a house. To start the home mortgage process click here.
The home buying process involves several stages; a home inspection and home appraisal are inclusive. Home appraisal and home inspection have only one thing in common. They both occur before buying the house, and as State Management explains, “they also assist buyers in acquiring the best deal”. In this article, we will explain in detail the differences between an inspection and an appraisal.
What is a home inspection?
Home inspection involves a detailed assessment of a house before it is being sold. This assessment aims to check every feature of the house for underlying problems. It makes use of a well-detailed checklist and follows a step-by-step process. During the home inspection, the inspector uses the list to score different components of the property.
The home inspector is a licensed professional that offers the buyer an unbiased report of the house’s condition. Home inspection focuses on different aspects of the house such as:
⦁ The home’s exterior, garage, garage, landscaping, outhouses, and roofing.
⦁ The home’s interior, together with the attic, basement, and appliances.
⦁ Structural components of the house. That includes the walls, floors, ceilings, and foundations.
⦁ The home’s system, comprising the electrical, plumbing, and HVAC system.
The home inspection process may last for over three hours. In the end, the home inspector will deliver the report to the ordering party, which may be the buyer, seller, or agent. In the overview, you will notice that the inspector rates specific issues based on the level of severity.
As a result, the ordering party will know which one is minor or significant. It also helps you to know which issues need a replacement or repairs. Sometimes, the buyer may decide to terminate the offer or renegotiate the price based on the home inspection report.
What is a home appraisal?
A home appraisal is a general assessment of a property by a neutral third party. It aims to give an unbiased view of the property’s market value by comparing it with similar houses in the neighborhood. This process requires a professional appraiser who is trained and licensed to perform the assessment.
Frequently, sellers set the property’s price subjectively. But by using measurable and transparent factors, the home appraiser will obtain a realistic price for the home. During the home appraisal, the appraiser makes use of parameters that everyone can easily understand and access.
Such parameters include:
⦁ The sales price of similar properties recently sold in the neighborhood.
⦁ The floor plan and square footage of the house.
⦁ The physical state of the home’s interior and exterior.
⦁ The number of bedrooms, bathrooms, and amenities in the property.
As part of the mortgage approval procedure, lenders usually order a home appraisal. They request this value analysis of the home to avoid paying in excess for what the house is worth.
The difference between a home inspection and a home appraisal
⦁ The initiator: A home inspection can be initiated by the buyer or the seller (pre-listing inspection). However, lenders order for the home appraisal as a mandatory part of the mortgage approval process.
⦁ The process: The home inspector uses a checklist that contains over 1600 items to assess the property from the roof to the foundation. They also utilize special tools. However, the home appraiser performs a visual assessment and walks through the house. They also check neighboring properties to make comparisons.
⦁ The aim: The home inspection aims to protect buyers from purchasing a property that has severe issues. However, the purpose of a home appraisal is to ensure an unbiased value evaluation of the property.
⦁ Buyer’s involvement: During the home inspection, buyers can accompany the home inspector. It is essential for buyers to do so because they will gain more knowledge about the issues in the home.
⦁ Time frame: The home inspection can last more than 3 hours on the property. But home appraisal takes a short time within the house and the rest of the time is in the office checking the value of similar properties in the area.
⦁ Impact on the loan amount: Home inspections do not change the loan amount. However, a home appraisal can affect the loan amount. That is because lenders will only offer the lesser of the purchase price or appraisal.
The bottom line
Home inspection and home appraisal are different processes that are essential during home buying. When you know the difference, you can use them to your benefit.