During a real estate purchase you will come across two types of services prior to the sale of a home: Real Estate Appraisal and Home Inspection. Although similar in some ways, home appraisals and inspections do in fact serve very different purposes. It is well worth knowing the difference between the two processes and when you might need one, the other or both as a buyer.
Real Estate Home Appraisal
A real estate appraisal is a detailed report on the monetary value of the property based on the elements of the home. It is a financial report, that is usually ordered by the Buyer’s financial institution for the purposes of obtaining a mortgage. An appraiser will carry out a home inspection checking the condition of the home, though it’s far less detailed than that carried out by a home inspector.
Generally, an appraiser will visit the home for 45 minutes or so, checking numerous elements such as square footage, number of bedrooms and bathrooms, major systems and structures etc. They compare their findings to the information on the property records to ensure everything is current. Then they then evaluate comparable homes in the neighbourhood and on the market in order to make an accurate estimation of the true value of the property.
A home inspection is a detailed look at the home and property condition. Areas of interest typically include a home’s:
- Floors and ceilings
- Built-in Appliances
- Site Drainage
- Deck and patios
A home inspector's role is to inform the buyer of the condition of the property and highlight any required repairs. Using the home inspectors report, the buyer can review the report and make a decision whether to continue with the transaction or request the seller makes the repairs prior to purchase or potentially lowering the offer. Home inspections allow buyers to avoid expensive surprises, they are not mandatory, but it’s in the best interest of the buyer to have one. They will be more informed as to the true condition of the property decision.
Appraisal vs. Inspection: Similarities and Differences
They both involve a professional visiting the home and conducting an examination of many of the same elements. Similarly, both occur prior to the sale of a home, and they both end in detail reports regarding the property. The potential buyer will typically pay for both a home inspection and appraisal process.
The main difference between an appraisal vs. inspection is that appraisal deals with the value of real estate, while an inspection deal with the condition of the house. The primary purpose of a real estate appraisal is to determine the market value of the home. An appraisal will allow the lender to decide whether or not, while an inspection will help the buyer assess the pros and cons of investing in a certain property. While the home inspection process ends once the inspector examines the details of the home, an appraisal takes more information into consideration than simply the condition of the home. An appraiser aims to formulate an unbiased accurate opinion of the value of a property. Using comparables on the properties to value the home, this takes into factor nearby school zones, crime rates and lot size.
Does a Buyer need one or both of these real estate services?
As a buyer, you will notice that on most real estate checklists include both a home inspection and a real estate appraisal. Regardless of how you go about purchasing a property, no one requires you to have a home inspection. Both are processes that are important in protecting a real estate investment, however if neglecting to carry one out you may find that the home you have just bought is in need of some unforeseen major repairs which could cost far more than what the budget.
Home inspections are generally voluntary for buyers, while appraisals might be mandatory if a buyer works with a mortgage lender or home loan company. If you are in the market for a new home, pay for both an inspection and an appraisal for total peace of mind before you buy.