Understanding The Difference Between A Real Estate Inspection And An Appraisal
Buying a home is a complicated and confusing process, especially for first-time home buyers. Once you have found your dream home and the sellers have accepted your offer, you need to prepare for the closing. Two items that you'll need to have completed by the closing are the home inspection and the home appraisal. Many buyers confuse those two processes. Here's what's important to know about your home inspection and the home appraisal.
What's a Home Inspection, and What Does It Include?
Naturally, before signing on the dotted line, you want to make sure your new home is in good shape. Often there are problems that are not readily apparent during your initial walk through. Your real estate agent will help you find a licensed inspector who will perform a detailed evaluation of the exterior and interior condition, and ensure that the structural and mechanical components are sound. Here are some of the areas the inspection will focus on:
- The condition of the foundation and framing
- Exterior components such as walls, roof, gutters, flashing, chimneys, skylights, patios, and decks
- Electrical components such as circuitry, breakers, outlets, lighting, and fixtures
- Heating and air conditioning systems including furnaces, fireplaces, insulation, and house fans
- Plumbing including water supply, condition of pipes, water heating systems, and drainage
- Interior components such as walls, ceilings, stairs, windows, doors, basements, and attics
After the inspection, the inspector will prepare a detailed analysis and report of the property. Although you as the potential new owner are not required to be present, it's a good opportunity for you to ask questions and learn about the house. If there are problems with the property, you should ask the seller to make the repairs or deduct the estimated costs from the purchase price.
What's the Difference Between the Appraisal and the Inspection?
While an inspector looks at the condition of the physical structure and various systems, an appraiser will evaluate the home to verify whether it is worth as much or more than the purchase price. Lending institutions have licensed appraisers that they prefer to work with. The appraiser will look at the size, style, features, and amenities and compare it to similar homes in the neighborhood. If the appraiser determines that the home is not worth the asking price, the bank will not approve the loan. Therefore, you'll need to renegotiate with the sellers, get an independent appraisal, or move on.
Of course, there is much more that goes into the final closing of your new home than the inspection and appraisal, but now you understand a bit more about these processes. Your real estate agent will help with most of the preparations and documents required at the closing, but it doesn't hurt for you to be informed about this complex and confusing process.
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