What’s the Difference between an Appraisal and a Home Inspection?

Posted on

Nov 02, 2021

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If youre planning to buy a home, anappraisalis an importantstepin the process. Its a professional evaluation of the market value of the home youd like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase. Its also a different step in the process from ahome inspection, which assesses the condition of the home before you finalize the transaction. Heres the breakdown of each one and why theyre both important when buying a home.

Home Appraisal
TheNational Association of Realtors(NAR)explains:
A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised!An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lenders decision to provide funds for a mortgage.
When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the home based on the sale price. Regardless of what youre willing to pay for a house, if youll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesnt loan you more than what the home is worth.
This is especially critical in todayssellers marketwhere lowinventoryis driving an increase inbidding wars, which can push homepricesupward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.
However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check. If theres ever any confusion or discrepancy between the appraisal and the sale price, your trusted real estate professional will help you navigate any additional negotiations in the buying process.
Home Inspection
Heres the key difference between an appraisal and an inspection.MSNexplains:

In simplest terms, a home appraisal determines the value of a home, while a home inspection determines the condition of a home.

The homeinspectionis a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process like the age of the roof, the state of the HVAC system, or just about anything else you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your real estate agent is a key expert to help you through this part of the process.
Bottom Line
The appraisal and the inspection are critical steps when buying a home, and you dont need to manage them by yourself. Lets connect today so you have the expert guidance you need to navigate through the entire homebuying process.

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