Home Inspection vs Appraisal. All You Need to Know

Buying a new property is the start of a new chapter in your life, and it’s essential to ensure everything is in working order. It is necessary to ensure that the amount you are paying for is worth the house. Hiring a professional home inspector and an appraiser is thus crucial before you purchase the home. This article will explore the difference between home inspection vs appraisal and why the two are essential, among other details.

Home Inspection vs Appraisal. Difference Explained 

Both an appraisal and home inspection are essential components with a similar price range that helps home sellers, buyers, or lenders determine whether or not they can move into a home, depending on its condition. 

Appraisal

The fundamental difference between a home inspection and an appraisal is the purpose that each represents. An appraisal seeks to determine a home’s worth, which depends on its internal and external conditions. The appraiser will also evaluate similar properties within the neighborhood, their location, and their size. After the appraiser finishes his work, he compiles a report and presents it to all interested persons. 

Home Inspection

During the home inspection, the hired inspector will concentrate on identifying components within and without the house that require repairs, assess a home’s condition. When inspecting a home, the buyer needs to be present to seek clarifications or ask questions on different components of the house. 

Another difference between a home inspection and an appraisal is that mortgage lenders require the latter. The inspection is not mandatory. Moreover, it is up to you to have a home inspection as a buyer. As for the appraisal, the lender will schedule it on your behalf.

Other differences are that:

• An appraisal will only focus on surface issues visible. An inspection will focus on finer details and even use specialized devices to assess the property’s condition.
• While an appraisal will determine whether you will get the mortgage loan applied for, an inspection will not.
• The appraiser and inspector have different professional skills expertise and are trained in varying fields. They also receive certifications for other working processes.
• An inspector will engage you during the inspection process and discuss the findings as he continues to work. The appraiser will wait until he compiles his final report before revealing his results.

Home Inspection vs Appraisal. When are They Needed? 

Home inspections and appraisals are necessary at different times and for varying reasons.

When an Appraisal is Necessary

Lenders will require an appraisal when seeking to finance a mortgage loan. With this, they will be sure that the home’s value is not less than the presented amount. During a mortgage refinance, some lenders might request a property appraisal to help them gauge the associated risk and allow the borrower to meet their financial needs. You will thus need to have your appraisal before closing the sale.

When a Home Inspection is Necessary

A home buyer is a party that will highly benefit from a home inspection. The inspection will help the buyer conversant with the home’s current condition before making the purchase. The lender does not mandate a home inspection, but it is crucial as an inspection contingency clause exists in the purchase contract. When negotiating with the seller, the home buyer can use findings from the home inspection to get a fair house price, especially if the home requires repairs.

Better to Get Home Inspection vs Appraisal

Both the home inspection and appraisal are significant during the home buying process. It could be tempting to rely on an appraisal only and leave out the home inspection. However, this may not be prudent since an appraisal will not offer home inspection details.

As a potential home buyer, a home inspection will do more in your favor since, through it, you will determine whether or not the purchase is worth it. It is, therefore, best that you schedule the home inspection before the appraisal. If the inspector finds too many issues with the home, you might opt out of the purchase, saving yourself the appraiser’s fee and time.

Advantages of Getting a Home Appraisal:

• It assists you in obtaining mortgage approval.
• It assures you don’t pay more for the house than it’s worth.
• When the appraisal is low, it gives you a cause to lower the home’s sale price.
• It makes sure that you submit the correct property taxes amount.

Advantages of Conducting a Home Inspection:

• It can assist you in safeguarding your money and minimizing any potential hazards.
• It will assist you in determining whether or not you should purchase the property and then feel great with your decision.
• It will make you feel more secure and at ease in your own home.
• It will give you a better idea of the state of your home.
• You’ll have a better understanding of your home’s nuances.
• It will verify that correct construction was performed if you build a home.
• When bargaining with the vendor, it can give you an advantage.

Low Appraisals

Low appraisals occur when the fair market value given by the appraiser falls below the agreed home selling price. It can be stressful to the buyer whenever this happens since they can lose the pre-approved loan request.

Various reasons can lead to low appraisals:

• Hiring the services of an inexperienced appraiser
• Purchasing during a high season when the available comparable rates are from other seasons
• When the appraiser does not get homes comparable to yours to gauge the fair market value
• When there are many bidders for the same property, the result will be a higher selling price than the fair market value.

If you are a buyer using financing, you can maneuver through this by:

1. Paying the difference by adding the remaining amount to what your mortgage lender offered you. Alternatively, you can bargain with the lender for a different finance plan.
2. Bargaining with the seller for a reduced price if you ascertain that the appraiser’s value was accurate. It may be unfair to pay more than a home’s worth. The appraiser’s report will be a handy tool when seeking a reduced price.
3. Contesting the appraisal by showing the lender the apparent errors committed by the appraiser. You can even request another estimate.

Conclusion 

When determining the direction to take before purchasing a home, identifying the best approach between a home inspection versus an appraisal might not be apparent. However, after exploring the difference, it is evident that the two are distinct and equally important. 

Therefore, it is critical to obtain the services of professional home inspectors and appraisers to get concrete reports to help you make a wise buying decision.