There's a common misconception that home appraisals and home inspections are the same. While both provide useful information about a home's condition and potential value, appraisals and inspections are unique. We'll explain the differences and why both are helpful for home buyers and sellers alike.
Home Appraisals and Inspections: The Big Difference
There's one major difference between home appraisals and inspections: appraisals assess the market value of your home; inspections evaluate your home's condition.
Home Appraisals: The Specifics
The cost of an appraisal is generally around $400 and unlike an inspection, home appraisals take a macro look at your home. So it's unlikely that an appraiser will climb your roof, evaluate your plumbing and electrical, or crawl around in the attic.
In most cases, a licensed professional performs a walk-through of the property for a general assessment. Next, the appraiser uses that information to evaluate your home's value against comparable properties in the area.
Additional Facts About Home Appraisals
- Lenders usually require appraisals before approving a mortgage loan. Why? They want to protect their investment and ensure the property is worth the amount you paid for it.
- If you're paying cash for a home, you're not required to order an appraisal, but we recommend it anyway. Whether taking on a mortgage or paying cash, an appraisal will tell you if you're paying a fair price for the property.
- On occasion, appraisals come in low, jeopardizing your financing. Low appraisals occur for a few reasons:
- The price of the property is driven up by bidding wars
- Lack of comparable properties in the area
- Inexperienced appraiser
Should you receive a low appraisal, you have three options: contest it, pay the difference, or ask for a price reduction.
Home Inspection: The Specifics
Licensed professionals conduct home inspections, examining the house's physical structure from foundation to roof and everything in between.
Most inspector's reports reveal the condition of HVAC systems, appliances, plumbing, electrical, the roof, attic, windows, doors, and so on.
Most lenders require a home inspection, but even those paying with cash should consider having a home inspection. While an inspection doesn't guarantee a "perfect" home, it does help you anticipate what you're getting yourself into.
Additional Facts About Home Inspections and Appraisals
- Unlike an appraisal, the buyer and agent are usually present at an inspection. This gives buyers a bird's-eye view into the home's systems and overall condition.
- Following the inspection, prospective buyers receive a thorough report with photos and detailed explanations of the property's condition.
- Buyers pay for inspections and appraisals.
- Appraisals and inspections give buyers leverage. If you don't like the results of either, you can renegotiate your offer based on the findings of the inspection and appraisal.
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