Realtors typically recommend having the property checked before finalizing the purchase, with home appraisal and home inspection as your options. And as a home buyer, the terms can get confusing between the two, as they both seem like the same thing on the surface.
However, home inspection and home appraisal function differently. This article will discuss the general concept between the two choices, along with key differences and perks for each one.
Home Appraisal Explained
An appraisal is done to get the property’s fair market value. Most mortgage lenders require buyers to request a home appraisal to qualify for financing, as they’ll use the report to approve the loan.
Licensed third-party appraisers conduct the appraisal on behalf of the lenders and determine the property’s value based on several factors. These factors include the following:
- Property size
- Property condition
- Average price of houses sold in the area
For single-family homes, the appraisal usually costs around $450- $850, depending on the size and location of the property.
Home Inspection Defined
An inspection is where certified inspectors go through the property to validate its current condition. The process is more intricate, as it assesses the overall integrity of the property.
During a home inspection, the licensed inspector looks for potential issues or damages in the property that can be considered red flags for buyers. These include:
- Structural integrity of the walls and exterior
- How old and durable is the roof
- Condition of the electrical, water, and plumbing systems
- If the heating and air conditioning setup is working fine
In addition to these routine tests, they can also check for the following:
- Pests (mice, termites, ants)
- Unclogged chimney
After the process, the inspector hands the results over to the buyer and, based on the results, can negotiate for repairs or price changes to settle for a final price.
Costs usually run between $279 to $400, depending on location and how intensive you want the inspection to be. While optional and won’t affect your loan application if opting for financing, they highly recommended it. However, you need a home inspection for an FHA or VA loan.
Critical Differences Between Home Appraisal and Home Inspection
Home inspections and appraisals function differently, while both have something to do with checking the property.
- Appraisals check the home’s value, while inspections verify the property’s structural integrity.
- Lenders require appraisals, while inspections are optional but highly recommended
- Buyers don’t need to be in the property during an appraisal, while it’s encouraged for buyers to be present during inspections
- Appraisal results affect the buyer and the lender. Inspections are between buyers and sellers.
Appraisal or Inspection: Which Option Should You Go For?
For better chances of mortgage approval and peace of mind, it’s best to avail of both services. On the one hand, appraisals will help you get a more favorable loan result. On the other hand, inspections assure that your new home will be safe and up to your standards.
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