Throughout the real estate process, you’ll find yourself coming across critically important terms you may not yet be familiar with. Two terms that can be especially confusing are “inspection” and “appraisal.”
Both of these are similar, in that an expert walks through a property in order to spot trouble areas, but they both play very different roles in the home purchasing process.
What are home appraisals?
Home appraisals are ordered almost entirely by lenders, although the cost may be passed onto the buyer at closing. Their appraisals are designed to get a broad understanding of the value of the home, but not necessarily look at the specifics. The appraiser will walk around the home and provide a thorough visual walkthrough, looking for anything that could lower its perceived value. In addition, the appraiser looks at:
- Square footage
- Neighborhood home values
- Property layout
- Exterior condition
Although home appraisals are very thorough, they’re not designed to examine some of the smaller, replaceable components of a home. For example, a home appraisal is unlikely to take into account the quality of a working dishwasher, or whether or not all of the plugs work. They are primarily looking at how much of a loan is appropriate for that type of home, and what type of risk there may be.
What are home inspections?
While home appraisals are beneficial for buyers, they are still primarily for the lender. Home inspections, however, are solely for the buyer. Although some sellers may order a home inspection prior to listing in order to see if they can spot any problems before their home is shown to buyers, most home inspections are used by buyers as a way to determine if there are any problems with the property.
Unlike a home appraisal, the inspection does test various home components, such as the electrical system, heating, appliances, etc. For buyers, home inspections ensure that you are not surprised by a safety issue, an expensive repair, or a hidden problem with the home that appraisers may have missed. If any problems are found, they could theoretically be used to lower the cost of the sale or allow the buyer to back out.
Navigating the appraisal and inspection process
It is important for anyone that is looking into buying and selling a home to fully understand each part of the purchase process, and that includes home inspections and home appraisals.
At Open Mortgage, our loan specialists are always happy to answer any question you may have, and will go out of their way to make sure you have the most informed experience.
For more information about inspections, appraisals, or any part of lending, contact me today!