Differences Between a Home Inspection and an Appraisal

In the real estate world, inspection and appraisal are two significant terms. Both are important steps in the home buying process. Essentially, a home inspection helps to protect the buyer from purchasing a maintenance headache, while an appraisal is designed to protect the interests of the lender.

If you are just getting started in real estate, REMAX Infinity warns that understanding the differences between the two processes is key to accomplishing different tasks.

So, what’s the difference between the two? We’ve broken down each process below to help you get a better understanding of what they involve.

What is a home inspection?

A home inspection involves an evaluation of the condition of the home’s critical components. Each component is individually inspected and tested by the home inspector.

Generally speaking, a buyer will usually spend between 300 and 500 dollars for their home inspection. A relatively low price, considering an inspection can help reveal a variety of problems that you might have otherwise missed.

Such problems include electrical issues, plumbing issues, roof or foundation problems and anything else that could end up costing a fortune to repair.

What does the home inspection process involve?

The first step in the home inspection process is to find the right home inspector for the job. You can ask your real estate agent to connect you with a couple of good candidates. Alternatively, you can ask friends, coworkers, etc. if they have a good reference for a home inspection company. Follow up their recommendations with an online search to see if other’s experiences and reviews are inline with their suggestions.

Once you find a few candidates you’re interested in, filter them out by asking them questions regarding their services. For example:

• Is the inspector available to answer questions after the home inspection?
• Is the inspector properly licensed and insured?
• When will the report be ready?
• Can I see a sample home inspection report?
• Can I attend the home inspection?
• What does the home inspection include?

Once you find the right home inspector you will likely need to sign a pre-inspection agreement. The agreement basically details everything that will be covered during the home inspection process.

Most home inspections on newer, average sized homes will take 2.5 – 4 hours on-site. Older homes will typically take longer, as will larger homes compared to smaller ones. You can then expect the home inspection report within 24 hours.

If you are happy with the findings of the report, that’s great! It means that the home is in good shape and you can move forward with the closing. However, if the report highlights problems, then you may have to consider your options.

Some options include asking the seller to lower their asking price, requesting that they fix some (or all) of the issues listed in the inspection report, or simply walking away. We recommend discussing any concerns with your Realtor, whose professional recommendations can help with your decisions.

What do home inspectors look for when inspecting a home?

The following items are just a few of the many components that a home inspector will check when inspecting a home:

• Roof
• HVAC Systems
• Attic, Insulation & Ventilation
• Plumbing System
• Foundation
• Electrical System
• Structural Components

What is a home appraisal?

A home appraisal, on the other hand, involves an appraiser walking around the home and its surroundings to gauge its value. The goal of the appraisal process is to asses the fair market value of your soon-to-be-house.

A home appraisal is one of the final steps in the home buying process. Lenders require it as they won’t lend more money than the value of the property can secure.

An appraisal visit can take anywhere from 15 minutes to several hours, depending on the size and complexity involved.

What does the home appraisal process involve?

The first step in the appraisal process involves extensive market research. This will include looking for homes that have recently sold in the surrounding area. Particularly homes with similar square footage, and a similar number of bedrooms and bathrooms.

Once the research phase is over, the appraiser will likely have an idea of what the fair market value should be. Next, they will visit the property to look for desirable features as well as deficiencies.

Some desirable features include:

• Improvements to the outdoor property. These include items like an in-ground swimming pool, a garden or pond
• Good location. Proximity to well-guarded school districts or houses with a desirable view typically fall in the good location category
• Additional bathrooms, granite countertops, well-maintained hardwood floors, and other luxuries are typically considered desirable features

Some deficiencies that can hurt the value of the home:

• Drainage issues
• Water damage
• Lingering odors from smoking or pets
• Peeling paint
• Cracked tile

Finally, the appraiser will write a report and deliver it to the bank. Basically, a home appraisal is a process to ward off misrepresentation and fraud.

So there you have it. The difference between a home inspection and a home appraisal. For complete peace of mind, make sure to schedule them both if you are in the market for a new home.