It’s no secret that real estate can be one of the most lucrative industries to get involved in. Whether you’re buying or selling a home, chances are that you’ll need to incorporate a home inspection, home appraisal, or both at some point during the process.
But, not everybody understands the difference between the two. Fortunately, the answer isn’t as complicated as it may seem at first.
Not sure where to start? Don’t worry, we’ve got you covered.
Let’s take a look at everything you need to know about a home inspection vs appraisal.
As the name implies, a home inspection involves hiring a professional inspector to evaluate the house. They take a handful of factors into consideration, such as the physical integrity of the home, the overall condition of its components, etc.
More specifically, and inspector typically investigates the plumbing, electrical wiring, roof, foundation, and HVAC systems in search of any issues that need to be conveyed to the parties involved.
Inspections are held so that the buyer can stay informed about any areas that need attention. For example, foregoing a home inspection puts the buyer at risk of purchasing a property that has outstanding issues. In some cases, these could be particularly worrisome, such as wiring problems.
Since most of the benefits of a home inspection apply to a buyer, they are typically the ones responsible for organizing a formal inspection.
After the inspector completes their job, they will write a report the details their findings.
This report can also be used as leverage during the transaction. For instance, a buyer may suggest that the seller should lower their asking price due to outstanding repairs the buyer will have to make if they purchase the home. They could also ask the seller to make any necessary repairs before the transaction concludes.
Appraisals are similar to inspections, but they focus more on the monetary value of the home as opposed to its overall structural integrity.
In the vast majority of scenarios, the professional conducting the home’s appraisal will be an unbiased third-party. If a lender is involved in a real estate transaction, they are usually the ones who organize the appraisal of the property.
Initially, an appraiser will evaluate the home on their own similar to how an inspector would. However, they use this information to establish the value of the property.
They use the findings from their appraisal along with the value of comparable homes in the area in order to formulate an accurate number.
During the final report that they create, the appraiser is responsible for conveying how they calculated the financial value of the home. They then send this report to each party involved— typically the lender, buyer, and seller.
This report will also include information on the current local real estate market, sales statistics related to similar homes, etc. so that each party has a full understanding of the factors that influenced the appraiser’s decision. Otherwise, it may not be entirely obvious how the appraiser was able to reach their conclusion.
Home Inspection vs Appraisal
As previously mentioned, the most obvious difference between the two is that an appraisal is conducted in order to establish value while a home inspection aims to evaluate the overall condition of a property.
An appraisal is also much more in-depth than an inspection since it involves researching market trends and other similar properties. After the inspector has completed their analysis, their role has concluded.
It’s important to note, though, that an inspector spends far more time within a home that an appraiser does.
In general, an appraiser more or less conducts a simple walk-through when visiting a property. An inspector typically spends several hours within the home while investigating the necessary attributes.
While there are a handful of similarities between the two, the most significant is the benefit that they provide to a buyer. An inspection will prevent a buyer from discovering issues on their own after they purchase the home, and an appraisal will ensure that they pay a fair amount.
Do You Need Both?
Occasionally, buyers will have no choice but to work with an appraiser if it’s mandated by their lender. If they’re paying for the home on their own, though, they don’t always have to go this route.
Although an appraisal will give you an accurate estimate of the home’s value, the price you choose to pay is still up to you. For instance, you may be willing to pay more than the market value for a home due to its geographical location.
An inspection, though, is something that you should never neglect. Without hiring a professional to conduct a thorough analysis, you’ll never be absolutely sure that the home you intend to purchase doesn’t have any outstanding issues.
So, it’s highly recommended to hire a qualified, professional inspector simply for peace of mind. Otherwise, you may find that you have to deal with costly repairs entirely on your own when they could have been handled before the transaction took place.
Understanding the Differences
With the above information about the nuances of a home inspection vs appraisal in mind, you’ll be well on your way toward making the decision that’s best for you. If you are purchasing a home in Central Florida or the Orlando area, call us today to set up a home inspection.
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