If you’re planning to buy a home, you’ll need a property inspection and an appraisal before you can complete the purchase. Maybe you’re wondering if, or why, you need both. In this blog, we’re going to discuss the difference between a home inspection and an appraisal.
A home inspection assesses the condition of the home before you finalize the transaction. An appraisal is a professional evaluation of the market value of the home you’d like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase.
An inspection is usually ordered by the buyer to determine if there are any structural issues with the property that need to be addressed before the transaction can be completed. Oftentimes a seller will conduct their own inspections prior to listing the house for sale so they can fix anything requiring repair before showing the house.
Here’s a breakdown of each one and why they’re both important when buying a home.
Here’s the key difference between an inspection and an appraisal. Bankrate says:
“In short, while an appraisal helps you understand a home’s value, inspections help you understand a home’s condition.”
The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process – like the age of the roof, the state of the HVAC system, or just about anything else – you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your real estate agent is a key expert to help you through this part of the process.
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! An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lender’s decision to provide funds for a mortgage.”
When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the home based on the sale price. Regardless of what you’re willing to pay for a house, if you’ll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth.
This is especially critical in today’s market where low inventory continues to drive competition for available homes, which can push home prices upward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.
However, a lender will only allow a buyer to borrow based on the value of the home. This is what helps keep home prices in check. If there’s ever any confusion or discrepancy between the appraisal and the sale price a trusted real estate professional, like Bay Shores Real Estate, will help you navigate any additional negotiations in the buying process.
The inspection and the appraisal are critical, and necessary, steps when buying a home and you don’t need to manage them by yourself. At Bay Shores Real Estate we’re a different kind of real estate office. We are a partnership of professionals, each dedicated to helping people find the life they love. One with more free time, less financial stress, more beauty, and less worry. Our firm brings all of the key real estate related services discerning clients need, together under one roof.
Let’s connect today so you have the expert guidance you need to navigate the entire homebuying process.