Having a home inspection and an appraisal are routine steps in the home buying process. Although there are some similarities between these steps, there are also important differences.
In short, the home inspection evaluates the condition of the home while the appraisal evaluates the value of the home.
The Home Inspection
The home inspection is performed after the seller accepts your offer on a house. During a home inspection, the home inspector will inspect the home looking for defects that could affect the safety of your family or the value of your home.
A typical home inspection evaluates the condition of the roof, exterior, foundation, attic, plumbing, electrical, garage, and interior. After the home inspection, the home inspector will produce an inspection report. The report outlines the condition of the home and details the presence of any defects.
Common home inspection defects include roof leaks, faulty electrical wiring, and plumbing leaks. The home inspection report can also include maintenance tips like caulking around windows and plumbing fixtures.
Appraisals
An appraisal is an unbiased estimate of a home’s fair market value. The appraisal is typically performed after the home inspection and is ordered by the lender. Lenders want to make sure they are not lending more money than what the property is actually worth.
During the appraisal, the appraiser will research sales information from similar properties, physical characteristics (square footage, bedrooms, bathrooms, garages, etc.), and the observable condition of the house.
The appraiser will then compile this information into a report with an estimate of the home’s value. Problems usually occur when the appraised value is lower than the asking price. If this occurs and you still want to buy the property, you will have to come up with the difference in price. If the appraised value is higher than the asking price, it is a good thing and means that you have that much more equity on the house.
In summary, the difference between a home inspection and appraisal is that a home inspection focuses on the condition of the house while the appraisal focuses on the fair market value.