Home Appraisal vs. Home Inspection
I am always right, but I do want to concede and give credit where it is due. My dear husband, Alok, pointed out something important after reading last week’s update. I missed addressing the difference between a home inspection and an appraisal. So, thanks to Alok, here it is!
The purpose of an appraisal is to determine the value of a home, considering its condition, the local real estate market, and comparable properties nearby. On the other hand, an inspection solely assesses the physical structure and systems of a home to determine if repairs are needed. The inspector’s goal is to ensure the home is structurally sound, not to determine its value.
Home Inspection:
- Last chance to check for defects before committing to the purchase.
- Usually happens during the due diligence period.
- Typically hired and paid for by the buyer.
- An objective evaluation of a house’s physical condition, covering the roof, electrical systems, plumbing, foundation, HVAC, and more. It offers peace of mind by pointing out any problems needing attention.
- Inspections aren’t mandatory but can be a wise investment to avoid unexpected, expensive issues after closing.
- Average cost in the U.S. is between $400 and $700, varying by the home’s size, age, and the inspector’s travel time.
- Based on the inspection report, buyers can negotiate repairs or replacements. If there are many red flags, buyers can accept the flaws, negotiate a lower price, request repairs, or back out of the deal.
Appraisal:
- An evaluation by a third party, usually paid for by the buyer.
- Ordered by the lender before closing to ensure the home is worth at least the purchase price; buyers can’t choose their appraisal company.
- The appraiser compares recent sales of similar properties, market trends, and conducts an in-person inspection.
- If the appraised value matches or exceeds the contract price, the transaction proceeds. If not, the seller may lower the price or refuse to negotiate.
- If the seller refuses, the buyer can make up the difference, request another appraisal (subject to lender approval), or walk away from the deal.
- The appraisal process can take days to weeks; a second appraisal will extend this time.
- Appraisals are crucial for ensuring both the lender and buyer are comfortable with the investment.
The key difference between an appraisal and inspection is that the appraisal focuses on the home’s value, while the inspection focuses on the home’s condition. Unlike a home appraisal, a home inspection is usually optional.
Hope this clears things up! Have a great 4th of July, everyone!
The BankSouth Mortgage Advantage:
Experience the speed of ReadyApprove from BankSouth Mortgage, where you can secure conditional approval for conforming loan limits within hours. You’ll be armed with the confidence to quickly submit an offer, and the seller will see you as a serious, prepared buyer. Have peace of mind with our FREE one-time rate float-down and no lender fee refinance options!
Take advantage of our Buy Now, Refinance Later with a No Lender Fee Refinance* option for buyers who are purchasing currently at increased interest rates. Homebuyers who started their loan application with BankSouth Mortgage on or after June 15th, 2023, and close their loan with BankSouth Mortgage will be eligible for exclusive savings. Available on primary residence only and must be used within 60 months of the close date.
*Must refinance after 6 months from the 1st payment date and within 5 years of the close date. Available for new applications on or after 6/15/2023. Subject to credit and property approval. Additional conditions may apply. Terms are subject to change. “No Lender Fees” only apply to origination charges.
Blog post date: Thursday, July 3, 2024
