A very common question home owners & homebuyers have for REALTORS is: what’s the difference between a home inspection and a home appraisal? After all, each plays an important part in the home buying process and each helps protect homebuyers so they don’t pay too much for a home. Both home appraisals and home inspections involve third parties that view the home for sale to asses it and provide a report regarding those findings. However, there are important differences between a home inspection and a home appraisal, including who those reports are really serving. Here’s a quick overview of each.
Most Nashville homebuyers make an offer on a house for sale contingent on the home inspection report. The buyer is responsible for paying for this inspection, which means that the home inspector is really a client of the buyer. The home inspection will include detailed information on the overall condition of the property with an itemized list of deficiencies, safety concerns or repairs needed for the house & property. Home inspectors will complete a hands-on investigation of the entire home, from the crawl-sapce to the attic to check for code and regulation violations, both major and minor. They are checking for structural soundness, general electrical and plumbing issues, etc.
Today’s home inspection reports are often overwhelming at first to homebuyers. After all, being handed a 30+ page report with a list of potential “problems” on your dream home can be daunting. However, these lists often contain every single detail, including very small things like a missing switch plate cover. It’s important to look through the list carefully and ask the inspector to walk through anything that is a major concern. If the home inspection report does reveal a large issue, this is where a homebuyer can potentially bargain for it to either be fixed or a reduced asking price on the home.
Unlike the home inspection report, the home appraisal is not a detailed breakdown of all the items that may need to be fixed in a house. The home appraisal report is required by the lender, making the lender the client. The home appraisal assesses the value of the home for sale and provides the estimate for what the home is worth. Lenders use the home appraisal to approve or deny home loan mortgages; lenders will not approve a loan where the mortgage loan amount is more that the value of the home. Home appraisers look at factors such as lot size, square footage, recent sales in the neighborhood and construction quality. However, they will not make suggestions on repairs or damage other than to note if it diminishes a home’s value.
Since home appraisals on the exact same home can vary according to the real estate market, it’s important for home buyers to be familiar with recent sales in the area. For example, a 3 bedroom, 2 bathroom all brick house may appraise for different values in Franklin or Nashville or Murfreesboro, depending on the surrounding comps and lot value. If the home will not appraise for the loan amount, homebuyers have to decide if they want to make that difference up in cash or walk away from the property.
Buying a home is an emotionally charged process, and having a professional REALTOR involved can be a life saver. With both home inspections and home appraisals, an experienced REALTOR will help to guide homebuyers and sellers through any unexpected issues. Real estate agents can help homebuyers remove the emotion, look at the reports logically, and guide them into making the right decision regarding their bid offer and negotiations.
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