If you are about to sell your home and already have buyers lined up to buy the property, there is a chance that you will have to endure two separate evaluations of your home. Most buyers will order a home inspection before they pay for a property and make the completion of the purchase dependent on the result of the home inspection. But you probably know this already.
What you probably don’t know is that your home may need another assessment; a home appraisal. If your buyer is planning to use a loan to buy the house, the lender will order another evaluation of your property, explains Cory Real Estate Services. You may wonder if the buyer has already done a home inspection, what the use of a home appraisal is. Are they not the same?
No, they are not. The home inspection and home appraisal are similar because they focus on your home. Also, you perform them before completing the sale. However, they are different because their purpose and processes are dissimilar. You probably want to know the difference between the home inspection and home appraisal and why your home has to have both.
The Home Inspection
A home inspection is a highly detailed examination of a home that is about to be sold. The buyer orders it, and its goal is to assure the buyer of the home’s quality. It gives the buyer the tools necessary to determine if they are getting a fair price. The home inspection provides the buyer with an unbiased professional opinion of the condition of the home.
Licensed home inspectors, who have an exhaustive list of items they check inside the home, conduct the home inspections. The home inspection focuses on the home’s structures, crucial systems, and the appliances inside it. Also, it aims to help a buyer avoid future problems with the house by uncovering hidden issues.
The home appraisal is a general assessment of the home, and it compares the house against other homes in the neighborhood. Trained and certified home appraisers conduct the Home appraisals. Its goal is to determine the market value of the property and prevent it from overpricing. It does this by using an objective pricing process with transparent and easily accessible parameters.
The home appraisal does not deal with its appearance, the physical condition of its structures, systems, or appliances. Its main concerns are the lot size, the number of rooms, the proximity of amenities, and the value of comparable homes. More than anything else, the home appraisal does a comparative market analysis of the house.
The difference between a home inspection and a home appraisal
Essentially, the home inspection deals with the physical condition of the home, but the home appraisal determines its fair price. Below, we explain the specific differences between these two types of property evaluation:
Lenders order the home appraisal at the buyer’s expense. It is a mandatory part of the loan process when applying for an FHA-insured mortgage. But the home inspection is a voluntary assessment requested by the buyer and paid for by the buyer.
Since the property serves as collateral for the loan, lenders need to know that the home is not overvalued. That is why they request a home appraisal. In contrast, buyers order a home inspection to protect themselves from the risk of buying a home with serious problems.
Typically, appraisers do a walkthrough of the home and conduct a visual inspection. On the other hand, home inspectors check every detail and use special devices. Home appraisers will also look at nearby homes and the whole area, but home inspectors don’t.
Home appraisals last a short time; the appraiser walks through the home and takes notes and measurements. The rest of the work is done in the office, looking at the value of comparable homes. Most of the home inspector’s job is inside the house, and the process can take more than 3 hours.
Impact on the loan amount:
The home inspection does not have any impact on the loan amount, but the home appraisal does. If the appraisal comes back with a value lower than the home’s sales price, the lender will reduce the loan amount; lenders will only loan up to 97% of a home’s appraised value.
Buyer involvement and participation:
The buyer is allowed to accompany the home inspector as he or she inspects the home. Home inspectors encourage this and will educate buyers on the issues with a house. The buyer is not allowed to accompany the appraiser; home appraisers work alone.