What’s the Difference in an Appraisal and an Inspection when Buying a Home? Many buyers get these terms confused during the process, but they’re both extremely important in the process to insure you’re getting what you pay for.
MSN explains: “In simplest terms, a home appraisal determines the value of a home, while a home inspection determines the condition of a home.” First in the process, the Home Inspection, is best performed by a licensed real estate inspector and paid for by the buyer. Consider using inspectors from a list of favorites provided by your Realtor based on their past experiences with the inspectors. The agent has seen many of these over time and can tell if the buyer is getting the best report for the price.
The inspector’s job is to evaluate all of the systems in the house and yard, from the roof to the foundation and everything mechanical or structural in between. The goal is to inform the buyer of the ages and performance of the major components of the home, report any deficiencies when compared to current building code, and especially report needed repairs that could be costly in the near future. They will also recommend further investigation by specialists in the event the concern is out of their scope of experience or expertise. Example, the HVAC system isn’t performing, or the foundation seems to be showing signs of stress/failure.
The National Association of Realtors (NAR) explains: “A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! Later, after the inspections and possible repair negotiations, is typically the timeframe for the APPRAISAL. This again should be performed by a licensed appraiser either sent by the Lender in the case of a mortgage, or ordered by the buyer in the event of an all cash purchase.
The appraiser’s job is to evaluate the market value of the house based on similar properties recently sold in the same subdivision or within a 2 mile radius and select by size, age, and amenities. Most reports that I have been presented include 4 to 6 recent sales. Each property is compared to the subject property, the buyer’s property under contract, and then adjusted to make it as equal to the subject as possible. EXAMPLE: The subject property is 2000 s.f. and one of the comparable properties is 2100 s.f.. The appraiser would take the price of the 2100 s.f. home and deduct a standard dollar amount per s.f. difference to the sale price to make it equal. Both steps, the appraisal and inspection, are the most important steps in the home buying process, once you’ve won the deal. Don’t do it alone! Find a professional and dedicated agent to walk with you through this process. They’ll take the fear out of the unknown and make it more fun and exciting while protecting you all along the way.