Many home buyers get a little confused as to the difference between an appraisal and a home inspection. Both are shown as deadlines on the purchase contract. You may be asking yourself “why is it needed if you are getting an appraisal, why would you need an inspection too?” Although the home inspection is optional, it is also highly recommended.
The key difference between an appraisal and an inspection is that the appraisal assesses the market value of the property you are purchasing. It gives you the value of what the property is worth by taking into factor the condition of the property (including any upgrades) and the surrounding comparable sales/active listings of similar properties. It assures that the purchases price of the property is in line with the necessary value needed for your mortgage financing needs.
If you are doing a government loan (FHA/VA, USDA) the appraiser will look for specific health and safety items that need to be sufficient and/or in compliance with HUD guidelines. These include items like peeling paint, stair rails installed, exposed electrical (ask a lender for other concerns they may look into). Conventional mortgages and VA mortgages have different requirements as well. Regardless of what type of loan you are doing your appraisal is focused on the value of the property.
An inspection is completed by a home inspector; they will look at all possible health and safety concerns of the property. The inspect what you “don’t” necessarily see in a walk thru of the property. They will be checking the plumbing (pipes), radon, possible lead paint exposure, any signs of structural issues, ventilation, heating, air conditions, electrical, drainage, etc. If they feel there are any issues to be addressed they will advise for you to hire a professional in that specific field of expertise, such as a structural engineer, plumber, and electrician. They will provide you with an idea of what is happening with the property and if they foresee any future problems. Some issues found could be a very costly expense. This is why the inspection is extremely important and highly recommended. It is a good idea to be aware of issues and then making a calculated decision after knowing the facts. Once you have your home inspection results back you can decide how to proceed with respect to requests you may make to have the seller fix items. The last thing you want is to do is purchase a property and a week later finds out your need to replace the electrical, replace the roof or a deal with a severe plumbing issue!
It is always good to be informed and prepared on the property you want to purchase.
If you have any questions please don’t hesitate to contact us, we are always here to help.