HomeTeam Inspection Service experts share what you need to know about the difference between the two and why a home inspection is so crucial.
Both the home inspection and home appraisal are important parts of the home buying process, but they should not be mistaken for the same event. Inspections and appraisals both have distinct purposes and different scopes, and understanding the difference between the two and the purpose of each process can help you feel more informed as you enter a real estate transaction.
“A home inspection is an important step to protect both the buyer and seller, but it is especially important for the buyer,” explained Adam Long, president of HomeTeam Inspection Service. “The appraisal is focused more on the value of the home, and it does not work to educate the potential buyer about the condition of the home and any risks present or repairs required.”
The purpose of a home inspection is to assess the condition of a property. A qualified inspector conducts a visual evaluation of the home, looking for issues or defects that may require repairs or maintenance. The inspector looks at the foundation, roof and everything in between, including plumbing and electrical systems, HVAC and structural integrity.
Once the inspection is complete, a report is provided to the potential buyer who can then use this information to better understand the overall condition of the home. Many transactions have an inspection contingency, meaning the purchase price can be negotiated to account for the cost of repairs that the new buyer will incur when moving in. Even if the real estate contract does not include a home inspection contingency, it is vital to have a home inspection so that the buyer knows the true condition of the home and addresses any issues or safety concerns present in the home inspection report.
It is important that a home inspection takes place at the right time. Typically, this is after an offer has been made and accepted but before closing day. This gives the buyer time to understand the true condition of the home, take advantage of any contingencies in the offer and feel fully informed walking into closing day.
“HomeTeam inspectors are certified and thoroughly educated, meaning they know what to look for throughout the course of an inspection,” added Long. “Some issues or safety concerns in a home are not clear to the untrained eye, so it is important to take this step to ensure there are no surprises once the purchase is completed.”
The home appraisal, on the other hand, focuses specifically on the perceived value of the home. This process is conducted by a qualified appraiser who evaluates a few key points to determine the market value of the home.
Appraisals focus on the size, location and condition of the property, and they also consider recent comparable sales. While condition is a factor in this evaluation, it is one of a few being evaluated, and the appraiser is not working specifically to identify circumstances a prospective buyer should know about. The primary purpose of an appraisal is to inform the buyer and lender of the monetary value of the home in the context of surrounding market circumstances.
Like a home inspection, an appraisal does end with a report, but the document includes information about the value of the property that can be useful for a lender. While some transaction processes place the appraisal after the home inspection, the timing of this process depends on the requirements of the lender.
While both the inspection and the appraisal are important steps, the home inspection greatly benefits the buyer, and the appraisal tends to benefit the seller and lender. Understanding the difference between the two is crucial for anyone involved in the transaction process, but both steps are certainly important to complete, each providing important information from varying perspectives.
