There’s often confusion between a home inspection and a home appraisal.
While there are similarities, the two serve different functions, but both are useful and needed when you are considering buying or selling a home.
Simply put, a home appraisal is done to establish the value of a home. An inspection is done to determine the condition of the home.
If you are considering buying a home and will need financing to do it, or if you are trying to borrow against the value of the home, you need an appraisal. The person performing the appraisal is determining the fair market value of the home and is likely be hired by a financial institution. The appraiser is never connected to the buyer or seller.
The appraiser considers several factors, including the home’s location and condition. And the outcome of the appraisal may impact your ability to get the loan amount you are seeking.
A home inspection is not necessary for an appraisal. But it is considered a good idea and can ultimately save money in the appraisal process.
Unlike the appraiser, the home inspector is working for either the buyer or seller. The inspector is hired to determine if there are structural issues with the home that can impact the sale or asking price. The inspector will perform a detailed examination of the home to determine its condition and if there are any significant problems.
As we have written in many previous articles here, the home inspector will examine the structure, roof, attic, basement, electrical system, plumbing, exterior and other items. The inspector then provides the client (the buyer or seller) with a report of findings. The result of this report could impact the final sale price of the home.
While they serve different functions, appraisals and inspections have some things in common. The most significant of these similarities is that either one can uncover issues that can impact a sale. Another thing they have in common is that both serve to protect a buyer who is about to make a large-scale investment.
So, because a home purchase is such a significant transaction, it is wise to do both, especially if there is a mortgage involved.