Appraisals and Home Inspections: What’s the Difference?
If you’re new to the homebuying process, you might be wondering what the difference is between an appraisal and a home inspection. While there are a lot of similarities between them, they serve two distinct yet equally important phases of the homebuying process. Let’s break it down!
A home appraisal is performed on behalf of the lender to determine the fair market value of the property. Whether you are buying or refinancing, appraisals demonstrate what the home is worth based on its features, neighborhood, and comparable properties nearby. Appraisals are required by mortgage lenders so they can ensure that they are not loaning you more than the house is worth.
A home appraisal includes:
- An evaluation of the condition of the home’s interior and exterior
- An evaluation of comparable homes in the area
- An evaluation of the home’s location/neighborhood
- An evaluation of the size of the home at the land it sits on
- An evaluation and determination of the home’s fair market value
A home inspection is a thorough examination into the condition of the house that reveals any repairs that need to be made. The key difference between an appraisal and inspection is that the appraisal focuses on the home’s value, while the inspection focuses on the home’s condition. Inspections are done for your benefit as the buyer, and while it’s not required, it’s standard for good reason. For example, you don’t want to move in only to find out the first time it rains that the roof leaks. A home inspector will look at the property’s structure and major systems to evaluate for safety and functionality — so you know about problems with the house before they become your problem. Buyers often use the inspection report as a negotiating tool, asking sellers to cover the cost of needed repairs.
A home inspection includes:
- An evaluation of the home’s structure and utility systems like plumbing, electrical, water and heat
- An evaluation of the home’s interior and exterior structures
- Identification of needed repairs
By grasping the distinct purposes of these two processes, you can make more informed decisions and embark on your homeownership journey with confidence. Interested in learning more about the home loan process? Contact one of our expert loan officers today!
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