The English language offers an extensive assortment of words. With so many possibilities to consider, it is no wonder that people sometimes confuse words that are similar, yet distinctly different in their meanings. Consider home inspection vs. appraisal. Although these synonyms both refer to the evaluation of a property, inspections and appraisals serve different purposes and provide different results. Anyone who is interested in buying or selling a home needs to understand exactly what these terms mean.
Home Inspection vs. Appraisal
As U.S. News & World Report explains, both home inspections and appraisals involve having a knowledgeable professional walk around a house and examine it carefully. However, while their methods may look similar, these professionals are looking for different things, and they perform distinct tasks that provide specific results. With regards to the matter of home inspection vs. appraisal, how are these evaluations different? And why should homebuyers care?
The Purpose of a Home Inspection
A home inspection is paid for, and ideally should be attended by, the potential buyer because its purpose is to provide expert insight into the property’s condition. This detailed evaluation of a property examines both the structure and its systems with the goal of identifying potential problems (source). While it does not look at everything and should not be considered a guarantee of any sort, a thorough home inspection should identify any major issues that could compromise the health or safety of the home’s occupants and provide the potential buyer with information about any defects that might cause them headaches either now or in the future.
What Does a Home Inspector Consider?
The purpose of a home inspection is to provide a clear overview of the overall condition of the property (source). While issues with pests, mold, asbestos, radon, and the septic system will require special inspections, a home inspector conducting an inspection will examine numerous features and systems. A typical inspection report will include the inspector’s findings about the following:
- The interior features, including the walls, ceiling, and flooring
- The exterior features, including siding, railings, porches, walkways, and driveways
- The roof
- The foundation and framing
- The doors and windows
- The attic and basement areas
- The insulation
- The ventilation systems
- The electrical systems
- The plumbing system
- The heating and cooling systems
The Purpose of an Appraisal
An appraisal is an unbiased professional’s opinion of a property’s value (source). Ordered by the lender and normally paid for by the seller at the closing table, an appraisal is done to ensure that the property’s value either equals or exceeds the purchase price. Because the home is used as collateral for the loan, lenders want to make sure that its value is high enough to cover the loan’s total so that if the buyer defaults, they can recoup their investment by selling the property.
What Does an Appraiser Consider?
Appraisers focus on different factors than home inspectors do (source). When completing an appraisal, an appraiser will typically weigh the following:
- The size of the home, including the number of square feet and the number of rooms
- The size of the lot
- The overall condition of the property
- The home’s floor plan
- Any upgrades that have been completed since the prior appraisal
- Any amenities and features
- The neighborhood and the value of surrounding properties
- The value of any recently sold comparables
Why Smart Homebuyers Want Both
Home inspection vs. appraisal: Once you grasp the difference, it is fairly easy to see why savvy homebuyers request both. As Realtor.com explains, the home inspector provides valuable data about the property’s condition. This data allows the prospective buyer to make informed decisions about the purchase. If problems are found, the buyer may choose to move forward as planned, walk away, or use the new information to negotiate a better deal with the seller. In contrast, the appraiser’s report offers reassurance of the property’s value and confirms that the buyer is not overpaying for the property.
A home is a major purchase, and there is a lot to think about as you select a home and find the right mortgage to fund its purchase. At PrimeLending of Springfield, Missouri, we do our best to make your path to homeownership as smooth as possible. Our team of experienced loan officers would be happy to answer your questions, help you explore your options, and provide the accurate information that you need to make the best decision possible. With our expertise and commitment to clear and timely communication, we can guide you through the process from application to closing. To learn more, please call 417-616-0777 or contact us online.