By Jasmine Eddy | 09.10.20
When a home seller secures a buyer, the home will need two different inspections.
On the surface, appraisals vs inspections of a home appear to serve the same function. They both perform walkthroughs of the property.
But, they examine different parts of the home. They also report that information to different parties.
What is the Appraisal Process?
The lender vets the prospective buyer’s ability to pay back a mortgage loan. While doing this, the lender ensures that the property is worth the loan amount.
So, the mortgage company sends a real estate appraiser to assess the value of the home.
The appraiser measures the size of the property and completes an property analysis. This includes comparisons to similar properties in the area.
Also, appraisers judge the home’s integrity. This includes:
- Home Repairs
- Home Upgrades
- General Upkeep
On the outside they want to make sure that everything is operable and well maintained. The appraiser isn’t concerned with the cosmetic view of the property.
They also make note of visible health and safety hazards. Examples include broken windows or loose banisters.
What Happens if the Appraisal is Undervalued?
The appraiser compiles this information into an appraisal report. Then, they send the report to the mortgage lender.
Based on the information provided, the lender extends the loan offer.
That is if the property’s sale price is in line with the appraised value.
If the appraisal is lower than the asking price there are some options for the buyers and sellers.
The buyer can ask for a price reduction in the list price. If the buyer has the funds and is willing to pay the list price, they can pay the difference in cash.
The seller can request a second opinion through another appraisal. Also, the seller can show the appraiser their own list of comparable properties. This is to justify their original listing price.
What is the Home Inspection Process?
A home inspection differs in scope from the appraisal. The home inspector does a thorough inspection of the space.
They inspect health and safety hazards as well as the integrity of every part of the structure. This includes:
- Electrical System
- HVAC Systems
- Home Siding, etc.
The home inspection usually takes several hours. Once the inspection is complete, the inspector delivers their report to the buyer. The buyer can then use this information to gauge if they want to make the investment in the home.
They can also leverage the information to renegotiate the pricing of the home or other parts of the deal. This includes the closing costs.
How to Prepare for Appraisals vs Inspections of a Home
Preparing for the home appraisal process is different from the home inspection process.
Here is what your client needs to know to make this process easier for the appraiser and inspector.
How to Prepare for the Home Appraisal Process
For homeowners, the appraisal process can be stressful.
The appraiser dictates the value of the seller’s home. There are some ways that homeowners can prepare for the appraisal to get top dollar.
One of the best actions homeowners can take when preparing for a home appraisal is to declutter.
The cleanliness of the home does not impact the appraisal value. But, a cluttered space makes it difficult for the appraiser to get a full, accurate look at the space.
Another suggestion is to perform cosmetic repairs or upgrades on the home.
For example, upgrading light fixtures, repairing a leaky faucet, or painting the walls. It is a good idea to keep a list of repairs and the receipts for the work completed to show to the appraiser.
The homeowner may see some of their money invested reflected in the appraised value.
How to Prepare for the Home Inspection Process
Home buyers should consider who they hire to complete their home inspection.
Purchasing a home is one of the most important purchases people make. So knowing what you’re buying is important.
One of the best ways to find a quality home inspector is to ask for recommendations. You can start with friends and family. If they had great experiences with their home inspectors, they might recommend them.
Review ratings on the internet is also helpful. The reviewing ratings helps you find home inspectors near you
Also, dedicated home inspectors are often members of local and state organizations. Checking the list of members near you is also a great strategy.
Once you have found some potential home inspectors, the next step is to interview them.
You want to be sure that the home inspector has experience, five years or more. Ask how long they expect their inspection to last and how detailed a report they offer.
Thorough inspections last several hours. It’s helpful to have an inspector who takes the time to inform you about the major issues that you need to address.
This could be through an extensive home inspection report or an onsite walkthrough.
Final Thoughts on Appraisals vs Inspections of a Home
Both home inspections and appraisals need professionals to assess the home. But, appraisers and home inspectors examine different things for different parties involved.
The appraisal protects the lender’s investment. They report on the property’s estimated value which the visual appearance determines.
Home inspections help protect buyers and sellers. Inspectors assess major and minor structural concerns with the property. This includes roofing, foundation, and plumbing.