If you are planning to buy a home and not familiar with the home buying process. It is important to know the difference between an appraisal and a home inspection. Here is the breakdown of the difference between an appraisal and a home inspection and why they’re both important when buying a home.
An appraisal is an important step during the home buying process. It is a professional evaluation of the market value of the home you would like to buy. An appraisal is usually ordered by the lender to confirm or verify the value of the home before lending a buyer money for the purchase.
The National Association of Realtors (NAR) explains:
“ 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, an unbiased appraisal which is required by the lender is the best way to confirm the value of the home based on the sale price. Regardless of what you are willing to pay for a house, if you will be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth.
This is especially critical in today’s sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.
The lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check. If there’s ever any confusion or discrepancy between the appraisal and the sale price, your trusted real estate professional will help you navigate any additional negotiations in the buying process.
During the home buying process the home inspection, assesses the condition of the home before you finalize the transaction.
Here’s the key difference between an appraisal and an inspection. MSN explains:
“In simplest terms, a home appraisal determines the value of a home, while a home inspection determines the condition of a home.”
The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process like the age of the roof, the state of the HVAC system, or just about anything else you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Working with your real estate agent can help you through this part of the process to help negotiate any issues that may have come up during the inspection.
The appraisal and the home inspection are critical steps when buying a home, and you don’t need to manage them by yourself. Let’s talk today so you have the guidance you need to navigate through the entire home buying process.
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