What Is The Difference Between A Home Inspection And An Appraisal?
If you are planning on purchasing a home soon, keep in mind that an inspection is an important part of the process. An inspection assesses the condition of the home before you finalize the transaction and costs. It is also different from an appraisal, which is a professional evaluation of the market value of the home you want to purchase. In most cases, an appraisal is ordered by the lender to verify or confirm the value of the home before lending money to the buyer for the purchase. In this article we will take a closer look at inspections and appraisals and why they are both important steps when buying a home.
What Is A Home Inspection?
A home inspection is how you as the buyer can determine the current state, safety, and condition of the home you are considering purchasing. If anything stands out as being questionable in the process, such as the age of the roof, the furnace, the state of the HVAC system, or anything else, then you as the buyer have the option to negotiate any potential repairs or issues with the seller before the transaction gets finalized. Your real estate agent is a key expert that can help you through this part of the process.
To expand on the difference between an inspection and an appraisal, Bankrate explains that:
“In short, while an appraisal helps you understand a home’s value, inspections help you understand a home’s condition.”
What Is A Home Appraisal?
To better cement the difference between an inspection and an appraisal, the National Association of Realtors explains:
“A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lender’s decision to provide funds for a mortgage.”
When you apply for a mortgage with your lender, your lender will require an unbiased appraisal to confirm the value of the home based on the sale price. Regardless of what you are willing to pay for your new home, if you are relying on a mortgage to fund your purchase, the appraisal will help to ensure that the bank doesn’t loan you more money than what your home is worth.
This is especially important during a sellers’ market when inventory is low and driving an increase in bidding wars, which can push home prices up. When sellers are in a strong position like this, they tend to think that they can set the price to be whatever they want as they assume that the competing buyers will be willing to pay more.
However, no matter what the state of the market is, the lender will only allow the buyer to borrow an amount based on the total value of the home. This is what helps to keep home prices properly balanced. If there is ever any discrepancy or confusion between the sale price and the appraisal, your trusted real estate professional can help you navigate any additional negotiations needed throughout the buying process.
Both the appraisal and the inspection are crucial steps when it comes to buying a home. Keep in mind that you do not need to manage these aspects yourself. Connect with trusted realtor Dianne Anderson today to get the expert guidance you need to navigate through the homebuying process in Southwest Florida.