People often use the terms “home inspection” and “home appraisal” interchangeably, although the terms have subtle differences in meaning. A home inspection lets a home buyer know the condition of the property, whereas an appraisal reveals the value of the property. Here’s a closer look at the similarities and differences between home inspections and appraisals.
Reason for Home Inspections
A home inspection helps a prospective buyer realize what needs fixing before committing to the investment. Without a home inspection, the buyer is taking a significant risk. For example, they might be in love with the home’s aesthetics but grow concerned once they realize expensive appliances need replacement.
A home inspection is also a chance for the seller to plan repairs or negotiate with the buyer. Overall, it’s a form of transparency that puts risk factors on the table so that the buyer knows what they are diving into.
Why Appraisals Matter
Getting a home appraised by an objective professional is the key to determining the property’s fair market value. All the figures published online about the pricing of homes on the market are just estimates. The real value of a home is what a buyer is willing to pay for it.
An appraisal presents a clearer picture of what the property is worth based on not just its age and condition but also current housing market trends. On any given day, the value may be higher or lower than the day before.
Appraisers are selected by mortgage lenders based on their licensing and credibility in the industry. While they also conduct inspections to evaluate property conditions, appraisers are not as thorough in checking home components as inspectors. Instead, appraisers focus more on how the economics in the area affects home values.
Inspectors, by contrast, aren’t concerned with local economic issues that influence home values. These issues might include school ratings, the local unemployment rate, and home building statistics. Appraisers, unlike inspectors, compare local economics with other markets and national statistics.
How Inspections and Appraisals Are Similar
One of the most obvious similarities between home inspections and appraisals is they are both performed by trained professionals with checklists. You wouldn’t want to just trust what a neighbor thinks about the condition or value of a target property.
Both inspections and appraisals are conducted before the closing deal. They also both result in an official report about the integrity and functionality of the property.
Key Distinctions Between Inspections and Appraisals
- Home inspections are not mandatory, whereas appraisals are usually required by the mortgage lender.
- Appraisals reflect factors beyond the property itself, such as current market values in the surrounding neighborhood whereas home inspections provide information about the condition of property and any existing and/or future defects.
- Inspections and appraisals are usually funded by the buyer, whereas appraisals are often paid for by the buyer and seller.
Buying a home involves ensuring transparency by scheduling both an inspection and appraisal. The more you know about a home before you buy it, the more satisfied you’ll be.
If you’re looking to buy or sell a home anywhere in South Bay or in the Hermosa Beach area, contact the experts at Brighton Escrow today. We are happy to offer you a top-tier escrow service.