Do you understand the difference between a property appraisal and a home inspection? Surveys show that many home buyers – even those who have purchased homes before – have some level of confusion about these two key aspects of a home purchase.
Appraisals are designed to estimate a property’s value based on a number of different factors. They are typically ordered by lenders to make sure they don’t approve mortgages for more than properties are worth. They can also be ordered by home owners or sellers who want the most accurate estimate of their home’s value. Appraisers typically document and photograph property amenities, inside and out. Appraisal reports typically take into account a minimum of three comparable sales of nearby properties to arrive at an accurate appraisal value.
A home inspection, by comparison, is a detailed, hands-on evaluation of a property’s condition. While a home appraisal is virtually a mandatory part of the home buying process if you’re taking out a mortgage loan, a home inspection is voluntary. But that doesn’t make inspections any less important. Inspectors look for costly and hidden defects and problems, such as roof issues, faulty heating/cooling systems, structural problems and leaky pipes, that could lead to costly headaches down the line for anyone who owns the home. They’ll also document any of a number of less serious issues.
Many home buyers who pay for a pre-purchase inspection make their offer contingent upon that inspection. Inspections are even more critical when purchasing a distressed property, due to the more limited amount of information potential buyers may have access to about a property’s condition and possible problems. If you’re a seller, a home inspection can give you a better idea of the overall condition of your home, any issues that may crop up during the sales process and any items you may want to consider fixing before listing it for sale.