Home appraisal vs inspection — homeowners often get confused between these two terms. Whether you are a buyer or a seller, you may mix up both these visits. Why? Because each of these procedures involves a professional visiting the house and evaluating its condition. However, appraisal and inspection are meant for completely different purposes.
Therefore, in order to understand what are the separate functions of an appraiser and an inspector, we have compiled this thorough guide. After going through it, your home buying or selling experience will be much more streamlined. Below, we have outlined the major differences between a home appraisal and home inspection, so that you can choose the correct option during your real estate transactions.
In order to understand how appraisals and inspections differ in terms of purpose, let’s understand the definitions of these two terms.
What is a home inspection?
A home inspection is primarily meant for buyers in order to evaluate the condition of the property they plan to purchase. It is not mandatory and not required by mortgage lenders.
A potential buyer hires a home inspector who visits the property and assesses its overall condition. He examines the mechanical systems, including plumbing, electrical, cooling, and heating systems. He also confirms if the house needs any repairs. Another factor that he confirms is if the home is secure and does not pose any safety or health hazards.
He then presents the final inspection report, complete with narratives, findings, diagrams, and images. If you see that there are some major issues, you can use this document to renegotiate your original offer for the property.
Note: A home inspection is highly recommended, but it is not mandatory in most closing processes.
What is a home appraisal?
A home appraisal report is mainly asked by a mortgage lender when he finances a home purchase. The document determines the exact market value of the property.
During a home appraisal process, the lender hires a licensed or certified real estate appraiser, who evaluates the condition of the house. He compares the residence with similar comparable homes located in the vicinity, checks the house’s location, and square footage. Finally, he gives a figure that closely matches the precise market value of the home.
The primary purpose of an appraisal report is to help the lender in determining how much loan amount he can approve for this particular property. He can finalize on the type of loan, amount of down payment, as well as interest rates.
Note: A home appraisal is usually required by a lender and the one who will be buying a home pays for it as part of the closing costs.
Appraisal vs inspection: Key differences
On average, the cost for a home inspection can range between $200 – $400. While small homes and condos, within 1,000 sq ft. can be priced at around $200 – $250, bigger homes can cost approximately $400 – $500.
The average cost for home appraisals can range between $200 – $600. For small, single-family houses, costs can be around $200 to $400. However, for bigger houses, these prices can be around $600 or more.
Of course, the above numbers can vary depending on the size of the home and location and of the property.
When to order
A potential buyer can order for a home inspection after the seller accepts his offer. Under most contracts, he gets a time period of around 10 days to finish the process and discuss any problem areas with the seller.
A mortgage lender usually orders a home appraisal after a home inspection is complete. He can then hire an appraiser to undertake the task.
A buyer can expect to get a home inspection report within 24 hours of completing the process. On the other hand, a home appraisal report is delivered within 7 business days from the time it is ordered.
As you can understand by now, an appraisal and a home inspection are two completely different processes. It completely depends on whether you wish to purchase the home or sell it. While an appraisal ensures that the lender gets a fair deal, a home inspection enables a buyer to know his prospective property from inside out. In either scenario, always remember to hire a certified professional for carrying out the procedure. Only then you shall get an unbiased evaluation for the property under consideration.