Buying a house, it is important to know the distinction between a home appraisal and home inspection. The two processes are crucial stages in the process of purchasing a property yet they have different purposes. Knowing what each of them involves can assist you in making sound decisions in the process of buying a home. Now, what is the difference between a home appraisal and a home inspection, why both are important, and how they can affect your choice.
What is a Home Appraisal?
A home appraisal is an evaluation of a home done by a licensed appraiser to come up with the value of a home in the market. An appraisal is done to make sure that the property is worth the amount that the buyer is willing to pay and usually lenders require this process during the mortgage process.
Why is a Home Appraisal Important?
Mortgage Approval: The appraisal is used to ascertain whether the property is worth the amount that the buyer is willing to borrow. In case the appraised value is less than the purchase price agreed upon, the full loan amount may not get approval of the lender. The buyer will have to renegotiate the price with the seller or raise more money to make the down payment in such a situation.
Fair Market Value: The appraiser will use the location of the home, size, condition, the sale of similar homes in the neighborhood, and the market trends to determine the value of the home. This gives the buyer and the lender a reasonable market value of the property.
What Does an Appraisal Include?
A home appraisal usually entails examination of the exterior and interior of the property.
The appraiser will:
- Take measurements of the house and determine its size and structure.
- Assess the state of the property, such as structural factors, such as the foundation, roof, and plumbing.
- Review the property’s location, neighborhood, and nearby amenities.
- Take into consideration the sales of other houses in the area (comparables or comps).
It is necessary to mention that home appraisal is not a thorough home inspection. The appraiser will evaluate general condition but the main point of this evaluation is to identify the value but not the possible problems.
What is a Home Inspection?
Home inspection, however, is an in-depth analysis of the state of the property, performed by a competent home inspector. The purpose is to find out any problems or flaws that may cause problems in the future with the livability, or safety of the home, which may end up costing a lot of money to fix.
Why is a Home Inspection Important?
Disclosure of Hidden Problems: Unlike the appraisal, home inspection is a comprehensive examination of the physical nature of the house. It may detect some underlying issues like mold, electrical faults, leaks in plumbing, and structural defects, etc. Being aware of these problems prior to buying the house can assist you to determine whether it is worth buying or you should negotiate with the seller to repair the house.
Peace of Mind: A thorough home inspection will provide the buyer with peace of mind as they know that the house they are buying is in good condition and will not need any major repair in the near future.
What Does a Home Inspection Include?
A home inspection is a very comprehensive process as opposed to an appraisal and includes the following areas:
Foundation and Structure: Checking to see any cracks or settling that would give rise to possible structural issues.
Plumbing: Water pressure, leak and pipes condition.
Electrical Systems: Making sure that all electrical systems are up to date, safe and in good working order.
Roof and Attic: Checking the roof to see the wear and tear and the attic to see the insulation and ventilation.
HVAC Systems: The heating, ventilation and air conditioning systems are also tested to check their effectiveness and efficiency.
Windows and Doors: Checking to make sure that there are no drafts, damages and inappropriate sealing which can lead to higher energy costs.
Appliances: Checking appliances that might come with the purchase of the house e.g. the oven, dishwasher, and fridge.
Home Appraisal vs. Home Inspection: Which One Comes First?
The home appraisal is usually preceded by the home inspection in the majority of the cases when buying a home. Once your offer has been accepted, the lender will usually order the appraisal to make sure that the value of the property matches the amount of the loan. But the home inspection can also be done after the buyer is sure that the price is good since the inspection will reveal problems that may influence the decision of the buyer.
How They Work Together
The home inspection and appraisal complement each other. The appraisal is value oriented whereas the inspection is condition oriented. In case the home inspection shows that there is a serious problem with the house, like structural problems, then the buyer can use this information to negotiate the purchase price or demand repairs prior to closing. On the other hand, the appraisal can be applied to identify whether the buyer is getting a reasonable price in accordance to the market value.
Should You Get Both?
To sum up, the answer is yes, it is significant to have a home appraisal and a home inspection when buying a house. They all have their own purpose and provide great insights that can save you from a bad investment. The appraisal will make you sure that you do not over pay the property and the inspection will make you sure that you are buying a good house. They are both crucial in order to make sure that your investment is good and that you are going to have a safe and comfortable place to live.