What is the Difference between an Appraisal and an Inspection?
When you are getting ready to sell your home, dealing with inspections and appraisals is part of the process. Your home is now a product that is being sold and needs to be evaluated. Many people think that appraisals and inspections are essentially the same thing but there are some key differences. Each property is unique, and the appraiser relies on his general expertise and specific research to arrive at an opinion of value.
An appraisal provides valuable information for the buyer and the seller, but the appraiser’s primary mission is to protect the lender/ bank. Lenders don’t want to own overpriced property and that’s why the appraisal takes place before the lender grants final approval of the buyer’s loan.
The Appraisal Process
Appraisers use a variety of factors in their decision making. They weigh the location of the home, its proximity to desirable schools and other public facilities, the size of the lot, the size and condition of the home itself and recent sales prices of comparable properties, among other factors.
Appraisers are not interested in whether or not the house is clean but they do notice signs of neglect such as cracked walls, chipped paint, broken windows, damaged floors and inoperable appliances.
If the buyer is applying for a mortgage the appraiser must survey the physical condition of the home and disclose potential problems to the buyer. No such obligation exists for cash buyers.
If a home receives an appraisal lower than the purchase price there are some ways the purchase can still go through. The seller can reduce the purchase price or the buyer could make a bigger down payment.
How Is An Appraisal Different From An Inspection?
An appraisal isn’t a substitute for a professional home inspection in fact they have some key differences. The appraiser formulates an opinion of the property’s value for the lender, while the inspector educates the buyer about the condition of the home and its major components. The appraiser is primarily focused on the value of the home whereas the inspector keys in on the home’s condition with an eye toward both existing and potential future problems.
Today’s buyers are more cautious, and an inspection ordered by the buyer is a regular part of the real estate purchase process. Spending the fees for a home inspection can be well worth it both for peace of mind and the potential cost of trouble avoided.
You may also want to ask the inspector if you can come along during the inspection. This will allow you to be able to see the problems or potential issues that will later appear in the report.
Ask your Lender for a list of qualified home inspectors/ appraisers.