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Now on with this week’s topic.
FAQ 3: What’s the Difference Between an Appraisal and a Home Inspection?
Over the course of our FAQ Series, I’ll be sharing a whole host of questions we’ve been asked during the last 15 years. Some will be a little bit deeper than others, while some will be just super-basic concepts most will already know. Today is one of the latter examples.
This FAQ came to us from a brand new real estate agent completely new to the process of selling homes. There’s a lot of people involved in a typical real estate transaction, and it’s very easy to get the players confused from time to time! In this short blog, I’ll answer the question, “What’s the difference between an appraisal and a home inspection?”
An appraisal and a home inspection are both used in the home buying process, but are two different processes that serve different purposes. We’ll look at both here.
A real estate appraisal is a professional opinion of a property’s value. It is completed by a licensed or certified appraiser and is usually required by lenders before they’ll approve a mortgage loan for a home purchase or mortgage refinance. An appraisal can also be used for non-lending purposes, such as for cash buyers, estate settlement, divorce settlement, and challenging property taxes. An appraisal usually involves a site visit that takes into account factors such as the size, condition, quality and amenities of a property. It also involves several different analytical methods, including comparing the home to recent sales of similar homes in the area, and an estimate of cost new (just to name a couple).
An appraisal is concerned with the ‘big picture’ of a home, whereas a home inspection, on the other hand, is a much more thorough examination of a property’s condition, systems, and components. It is conducted by a licensed home inspector and is typically not required by lenders. A home inspection is usually ordered by the prospective buyer as a condition of purchasing a home, to assess any existing or potential issues with the property. A home inspector will inspect all major systems with a fine toothed comb, like the structure, roof, plumbing, electrical, HVAC, appliances and foundation.
The difference in a real estate appraisal and a home inspection can easily be summed up by two words: value vs condition. Remember that an appraisal is concerned primarily with value, and a home inspection is mostly concerned with condition, and you’ll be set!
Committed to helping you understand your home’s market value,
Ryan Bays, SRA, AI-RRS