Home Appraisals vs Inspections: How Are They Different?
If you’re selling your home and have already secured a buyer, you’ll need to hire a professional for two different home inspections.
Appraisals and inspections both serve the same function: to check and assess the property. However, they do examine different parts of the home and report information they find to different parties.
The Home Inspection Process
A home inspection focuses on a different scope from the appraisal. A home inspector usually does a thorough examination of the property from top to bottom. They check for health and safety hazards, including the integrity of the structure itself and all of its parts.
A home inspection includes assessment of the following areas:
Heating, ventilation, and air conditioning (HVAC) system
Home siding and others
A home inspection can take several hours to complete, and once done, it will be reported to the buyer. The buyer then uses this information to assess whether purchasing the property at the said price is worth it.
On the other hand, information gathered from a home inspection may also be used to renegotiate the pricing of a property or other areas of the deal. It may include the closing costs, among others.
The Appraisal Process
A mortgage lender uses information gathered from a home appraisal to gauge the buyer’s ability to pay back a mortgage loan. The lender also uses this information to ensure that the property is actually worth the loan amount.
Basically, the mortgage company sends a real estate appraiser to assess your home’s value. The appraiser then measures your property’s size and performs a complete property analysis. He may also compare your property to other properties in your area.
A home appraiser checks the following:
The appraiser wants to make sure that everything in your property is operable and well-maintained, not precisely the aesthetic view of your home. Appraisers also note visible health and safety hazards, such as broken windows and loose banisters that may impact the assessment of your home.
What Happens With an Undervalued Appraisal?
The home appraiser compiles information gathered from the appraisal and sends a report to the mortgage lender. The lender will base their decision on the report on whether they’ll be extending your loan offer or not.
If the property’s sale price is the same as the appraised value, then you’ll likely get approved. But if the appraisal is lower than the asking price, there are more options for both the buyer and the seller.
The buyer can request a price reduction in the sale price. If the buyer has enough funds to pay the list price, they may pay the difference in cash. On the other hand, the seller can ask for a second opinion through another home appraisal. Moreover, the seller can also show the appraiser a list of properties in the same range to justify the original listing price.
Professionals perform home inspections and appraisals to assess a property. The difference is that home inspection involves checking for major and minor structural defects with the property. In contrast, an appraisal ensures the property’s estimated value is similar to the listing price to protect the lender’s investment.
Let’s Do It Home Inspections performs home inspections in Birmingham, AL to help clients determine whether a house is their dream home or nothing but a problem home. Our experienced and thorough home inspectors will do a clean inspection of any home and spot any potential issues if there are any. That way, you are guaranteed that the house you’re buying is worth the investment. Call us today at (205) 672-4247 to schedule your inspection!