Buying or selling a home? Understanding the difference between an inspection and an appraisal is crucial and could save you from headaches now and in the future.
Assessing a Home’s Value with an Appraisal
If you’re buying a home and need a loan, an appraisal is a must. An appraiser looks at the house, inside and out, and the property it’s on, and assesses the overall value. Lenders rely on professional home appraisals done by an impartial third party because they don’t want to loan a buyer more money than a house is worth.
- When does the appraisal occur? The appraisal happens as soon as possible after the buyer and seller agree on a price and the lender chooses the appraiser.
- How is an appraisal done? The appraiser bases his/her report on a variety of factors, including the location of the house and how close it is to good schools and public amenities, the size of the property, the sale prices of homes recently sold, and the overall condition of the interior and exterior of the home.
- Who pays for the appraisal? The buyer.
- Who does the appraisal protect? The lender.
- Any downsides to the appraisal process? The appraisal is helpful to both sellers and buyers, but it’s done specifically for the lender. If the value of the home is appraised lower than what the buyer plans to spend, the loan could fall through.
Inspecting a Home’s Condition Before Closing
After the seller accepts an offer from a buyer, the buyer can schedule a home inspection. Unlike the appraisal, the inspection lets a buyer know whether there are any major or minor problems with the house.
- When does the inspection occur? The inspection happens before closing, once the seller accepts the buyer’s offer.
- How is an inspection done? An inspector specifically looks at the condition of the home, including the structure, roof, heating and air conditioning system, and electrical wiring. It usually takes several hours because it’s a very thorough examination.
- Who pays for the inspection? The buyer.
- Who does the inspection protect? The buyer.
- Any downsides to the inspection process? If the inspector finds large issues, there may be a contingency in the agreement that lets the buyer dissolve the agreement. If damages are minor, buyers can try to negotiate with the seller to fix the problems before the home is theirs.
Got questions about inspections, appraisals, or the homebuying process? Reach out to one of our loan officers today to learn more.