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Even though both a home inspection and a home appraisal involve a certified professional visiting a house and evaluating the property, they are done for different reasons and at different times during the homeownership process. The biggest difference between a home inspection and a home appraisal is that a home inspection evaluates the condition of a home and a home appraisal evaluates the value of a home.
Both home appraisals and home inspections are meant to ensure a house is sold at a fair price and to give buyers an idea of the property’s physical condition. However, there are few more important distinctions between an appraisal vs. inspection that buyers and sellers should know.
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What is a home appraisal?
A home appraisal evaluates the current market value of the property and considers factors such as property condition, location, and amenities. Appraisals are done by unbiased professionals hired by the buyers or their mortgage lender.
What is included in a home appraisal?
Home appraisers look at various factors that could affect the home’s value. Some of these include:
- Recent sales of similar homes in the area
- Interior and exterior condition of the home
- Number of bedrooms and bathrooms
- Square footage of the property
- Improvements that could affect value (e.g. new flooring, roofing, appliances)
After a walkthrough of the property, home appraisers create an appraisal report with the estimate of the home’s market value. Many home appraisers use the Uniform Residential Appraisal Report from Fannie Mae for single family homes.
How long does an appraisal take?
The entire appraisal process typically takes a week or two to complete. When an appraisal is for a home buyer, it’s usually scheduled within a handful of days after the home offer is accepted by the current owner.
The home appraiser may spend a few hours walking through the property. When the inspector has completed the written report, the buyers and their lender will receive an appraisal report to review.
Who pays for a home appraisal?
Prospective buyers usually pay for the appraisal through the closing costs. However, some sellers pay for an appraisal prior to listing their home, and some homeowners pay for an appraisal if they want to refinance their mortgage.
What if the appraisal comes in under the sale price?
If the appraisal comes in under the home’s sale price, a lender may not grant the potential home buyers a mortgage at the purchase price. Buyers will either have to pay the difference out of pocket, try to negotiate a lower price more aligned with the appraised value, or let the sale fall through if they have an appraisal contingency.
Does a home appraisal impact property taxes?
Although home appraisers put a value on a property, the appraisal does not affect property taxes. Property taxes are determined by a government assessor who determines the value of the property based on previous years’ data combined with the local government’s tax assessment rate to come up with a total amount.
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What is a home inspection?
A home inspection is a thorough evaluation of the home’s physical condition. A home inspector licensed by the state will visit the home and examine the property for damages, hazards, or issues.
What does a home inspector look for?
Home inspectors evaluate the condition of the property and look at:
- House structure and foundation, including the attic and roof
- Major systems, such as electrical, water, plumbing, and heat
- Any potential issues or needed repairs
How long does a home inspection take?
Home inspections are scheduled one or two days after the buyer’s offer is accepted. Then, the inspector will visit the home and spend a few hours evaluating the property. The inspection report is usually available within a day or two.
Who pays for the inspection or any repairs as a result of the inspection?
Buyers have the option to hire a home inspector and pay for the inspection. In the purchase agreement, buyers often will include a home inspection contingency so if major issues are found in the inspection, the buyers can back out of the purchase without any penalties.
For costly problems, such as water damage or roof issues, the buyers may ask the sellers to pay for the repairs or pay a portion of the cost to fix the problem. Smaller repairs, such as a window not opening properly, may be the buyers’ responsibility.
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Are home appraisals and inspections required?
It depends. A home appraisal is typically required by a lender to approve the financing for a home buyer’s mortgage. An appraisal helps ensure that the loan is less risky for lenders, and that the home’s sale price is in line with its appraised value.
A home inspection is not usually required by lenders, but it is a good idea for home buyers, so they can understand the home’s condition and what potential issues may come up. The home inspection contingency can also come in handy should big problems arise, so the buyers have the option to forgo the sale.
Does a home inspection affect a home appraisal?
Since these are two separate processes done by different professionals, the home inspection usually doesn’t affect the home appraisal. There may be instances when the home appraiser asks to see the home inspection report, if there is one, to help them take into account the full physical condition of the home before settling on an appraised value.
How to prepare for an appraisal and inspection as a seller.
If you’re thinking of selling your home, there are a few things you can do to prepare for a home inspection and appraisal.
- Research the market conditions and sale prices of similar homes in the area to see where your home stacks up.
- Provide proof of upgrades made to the home, such as new gutters or appliances.
- Clean and organize the home to make the property seem well-cared for and more spacious.
- Declutter areas the home inspector will check, such as the utility room or attic.
- Make sure appliances, electrical systems, and other utility systems work.
- Make outstanding repairs to the property, if you can.
