What Is The Difference Between An Appraisal And A Home Inspection?

As a home buyer there are many steps that must be taken throughout the purchasing process. Two of the biggest milestones in the transaction are the home inspection and appraisal. For first time home buyers it may seem confusing because on paper the two can seem similar, but there are several key differences.

Both an inspection and an appraisal involve having an independent 3rd party come out to take a look at the property, but the reasons for their visits are different. In a home inspection, an inspector determines the current state of the home. They will check things like the foundation, roof, HVAC system, and much more. An inspector will look over the entire home top to bottom to make sure that there are no issues with the home or repairs that are needed. A home appraisal, however, is more focused on the value of the property. They will analyze the property as well as the values of similar homes in the area, compile the data, and provide an unbiased estimate of what the home is worth. 

The timing of the two visits is also another factor that sets an inspection and appraisal apart. The inspection typically takes place early in the transaction, oftentimes within the first week or two. This is because a buyer's agent will often include an inspection contingency in the offer they write for their client stating that they have the right to cancel the contract if the inspection reveals something about the home that the buyer does not like. This provides the home buyer protection from having an issue with the home come up that was not apparent during their tour of the property. It also prevents them from losing their escrow deposit when they cancel the contract. 

The appraisal, on the other hand, typically takes place a bit later in the transaction. Generally the buyer’s lender will order the appraisal so that they know that the home they are lending money for is actually worth what the buyer is paying. This is a way for the lender to protect themselves in case the buyer offers more than the estimated market value of the home. A buyer’s agent can also include what is known as an appraisal contingency in the offer they write for their client so that they can cancel the contract if the home does not appraise for a certain amount. 

When a buyer starts the home buying process it is important that they select an experienced real estate professional who not only knows how to draft a strong offer that includes buyer protections, but who also can guide the buyer through the inspection and appraisal process so that they have a complete understanding of what is going on. Our team has years of experience in the local market and we take pride in our ability to communicate effectively with our customers. If you have been considering buying a new home, give our team a call today!

For more information on the differences between a home inspection and an appraisal, take a look at this article from Keeping Current Matters.