As of 2020, the U.S. housing market is worth a whopping $33.6 trillion, almost as much as both China’s and America’s GDP combined. By the look of current housing trends, everything is looking up, and more and more houses are selling like hotcakes.
Home inspection and appraisal are among the most terrifying aspects of buying or selling a home. That’s because the results of both can make or break the sales agreement.
First-time buyers and sellers have a hard time differentiating between home inspection vs appraisal. This is completely okay because, after all, it is your first time. However, knowing the differences between the two is imperative to you selling your house the correct way or buying the correct house.
In this post, we’ll be looking at what home inspections and appraisals are and what makes the two so different.
Home Inspection vs Appraisal
Home inspections and appraisals are essential processes in buying or selling your home. However, some people use both terms interchangeably or use them to mean the same thing. Of course, they don’t mean the same, but what makes the two different?
Before we delve into the differences between home inspections and appraisals, let’s first get an idea of what both mean starting with an appraisal.
What Is an Appraisal?
A real estate appraisal or a home appraisal is a comprehensive third-party report that estimates the monetary value of a house. It offers valuable information to both the buyer and the seller of the home. Its primary reason, however, is to protect the lender from buying an overpriced house.
An appraisal ensures that every party in the house selling agreement gets a fair value of the house. It gives the lender the green light to lend a particular amount of money to the buyer. It also ensures the buyers buy the house at a fair price without leaving the seller feeling shortchanged.
The Home Appraisal Process
At the core of any home appraisal process is the home appraiser. The financial lender assigns the lender to a specific house to conduct the home appraisal. The appraiser must either be a certified or licensed appraiser or both, depending on the house in question.
A licensed appraiser takes care of less valuable and complex properties. A certified appraiser, on the other hand, handles much more complex properties with incredible value.
The Appraisers Independence Requirements ensure the lender never comes in contact with the appraiser. This ensures that the appraiser isn’t biased to any party in the sales agreement and gives a fair value of the house in question.
The actual appraisal process is fairly straightforward and isn’t too time-consuming. The appraiser scrutinizes the house, but to a lesser extent than a home inspector does. This involves checking whether all the systems are in good order and the general condition of the house.
The Appraiser’s Report
The appraiser will then compare the prices of the houses within the neighborhood and the locality. Ultimately, the appraiser comes up with a report which he/she furnishes the lender, buyer, and seller with. This report contains an accurate estimate of the value of the property in question.
The report also delves into details about the comparable sales, market trends, and any other factors that went into determining the final market value.
What Is a Home Inspection?
A home inspection is just what it sounds like. It’s the physical examination of a house to determine whether it’s fit for occupation. It also determines whether the house is worth the seller’s asking price.
A home inspection is much more comprehensive than a home appraisal. As such, a home appraisal should never substitute an entire home inspection. Instead, both should complement each other for the benefit of every party involved in the sales agreement.
The Home Inspection Process
Either the buyer or seller initiates the home inspection process. The buyer finds a qualified professional home inspector to carry out the home inspection. The home inspector will physically inspect every area of the house to determine whether it’s fit for buying or selling.
A good home inspector should have an inspection checklist that covers every area of the house. Some of these areas include:-
- The attic and roof
- The basement
- Staircases
- All the house systems
- Foundations and structures
The home inspection concludes with a report, just like with an appraisal. However, this report gives details of the house’s condition and not the market value.
Differences Between Home Inspections and Appraisals
There isn’t much that separates a home inspection and a home appraisal. However, here are some notable differences between the two processes.
The Purpose
A home appraisal aims to determine an accurate figure for the monetary value of the house. A home inspection, on the other hand, centers on the physical condition of the house. It helps the buyer understand the risk involved in purchasing the house and whether it will be a wise purchase.
Comprehensiveness
A home inspection is more comprehensive and exhaustive than a house appraisal. You can think of an appraisal as a simple walk through the house. While an inspection is just that, an inspection of every nook and cranny of the house.
As such, you should expect a house inspection to take anywhere from a few hours to a few days. An appraisal, on the other hand, could take no longer than 30 minutes, depending on the house.
Time of Inspection and Appraisal
A home inspection takes place before the actual purchase of the house. It’s from the home inspection that the buyer decides whether the house is worth buying. An appraisal, on the other hand, can take place after the sale of the house.
Should there be any changes to the market value of the house, then the seller can mark up or mark down the price.
Home Inspections and Appraisals Are Not the Same
Well, there you have it, folks. That’s pretty much all you need to know about the differences between home inspection vs appraisal. Remember, both of these processes are super important, and you should never overlook them when buying or selling your home.
A home inspection is only as good as the home inspectors you hire for it. For professional and expedient home inspections, schedule an inspection today, and we’ll sort you out.