Home Inspection Vs. Appraisal: What’s The Difference?
Interested in buying a new home? Want to figure out its true value and get the best bang for your buck? Then you should order an inspection. Or maybe an appraisal will be better? Unless you’re an expert in the field, you’re probably a bit confused about these terms. However, while they do have certain similarities, inspections and appraisals are two different things.
An inspection examines the condition of the property. An appraisal, in turn, is concerned with the value. How long do these processes take? How much will it cost you to order an inspection? What about an appraisal? Can you skip an inspection or an appraisal? And more importantly, what are the key differences? We’ve got your back on this one! Read on, and you’ll find all the answers!
Certified home inspectors are very thorough: they check every single corner of the house. Their #1 job is to evaluate the condition of the home. Inspectors start by checking the exterior (the walls, doors, windows, and the roof) and only then the interior (hardware, appliances, light outlets, and more). Inspectors are hands-on with everything, especially the major systems—electricity, plumbing, and HVAC.
Once the inspection is complete, the buyer will receive a list of recommendations specifying what needs to be fixed or replaced. This is important: you (the buyer) are not required to be present at the inspection. Still, we strongly recommend finding the time to be there on the inspection day. It’s better to see everything with your own eyes and hear the professional’s comments “on the spot”. The same applies to the seller as well, by the way.
What Happens During an Inspection?
Here’s a list of things (major areas) that a licensed home inspector will check before delivering a verdict on the condition of the house:
Inspectors also take their time with all the hardware, cabinet pulls, faucets, and water pressure levels, among other things.
How Long Does It Take?
On average, home inspections in the US take 2–3 hours. This largely depends on the size of the house. Plus, if it’s an old building with lots of issues, it might take the specialist a bit more time to check everything and include notes in their reports. In some rare cases, inspectors spend 1–2 full days on an evaluation. And if they discover issues like traces of radon, pests, and lead-painted walls, they recommend a second inspection. But mostly, you can expect them to be done in 2–4 hours.
How Do You Find a Good Inspector?
The United States law doesn’t require inspectors to have a license. Some states do, but the house that you want to buy might not be in those states. Now, you could do some research, of course. But, if you don’t have the time for that, ask your real estate agent. They’ll have a list of trusted inspectors in the area.
In contrast to an inspection, an appraisal doesn’t focus on the condition of the house. Instead, it’s a general evaluation and assessment tool. The #1 goal of an appraiser is to figure out the real value of the house (or any other building/property). Yes, the specialist will still visit the house, but only for a brief moment. Most of the “heavy lifting” is done in the office. By comparing the seller’s price for the house to that of recently sold houses, appraisals determine its market value.
The company considers the home’s location (is it a safe neighborhood, how many schools are in the vicinity), features, functionality, and curb appeal, as well as other factors. An appraiser won’t give you a list of things to repair in the house, nor will they check every single doorknob or roof tile. Instead, you’ll receive an accurate estimate of how much the house is truly worth. This is important: in most cases, it’s the lender that chooses the appraiser, not the buyer.
What Happens During an Appraisal?
Alright, now let’s see how a typical appraisal goes in the US and how the specialists evaluate a house:
Sometimes, the appraisal price is higher than what you negotiated with the seller. Generally, that’s a good thing because the lender will gladly approve the loan. In contrast, if the appraisal price is low, that can be a problem both for the buyer and the seller. That’s because the lender will only agree to a loan that’s appropriate for the appraisal (which is lower than the price you initially agreed upon). But if you work the details out, you’ll end up paying less.
How Long Does It Take?
In contrast to inspections, appraisals are rarely done in a couple of hours (or even days). On average, this process takes 7–10 days. Sometimes, you’ll have to wait for up to two weeks to get a complete appraisal report. It doesn’t take long to measure the square footage or check the walls and the fixtures. It’s the market analysis part that requires a lot of time and research to get everything right.
How Do You Find a Good Appraiser?
It’s easier to find a trustworthy professional in this field because all 50 US states require licensing for appraisers. You can check the constantly updated database on the US Appraisal Subcommittee website and find an appraiser that specializes in your area. Or ask your real estate agent for guidance.
Inspections And Appraisals: What Do They Have In Common?
An inspection is a visual assessment, while an appraisal is an unbiased estimation of a property. These processes do have many similarities, though, as they’re essentially two sides of the same coin. Here’s what they have in common:
Which Option Will Cost You More?
This largely depends on the state, the city, and the size of the house, but, usually, an inspection is a slightly more expensive tool. It will cost you somewhere between $200 and $700. Appraisal specialists, in turn, charge $250–500. In any case, before you order any of these professionals, make sure to get in contact with the company or the lender and check the actual price.
Can You Skip an Inspection? What About an Appraisal?
The short answer—yes, you can go ahead and skip both procedures. However, if you want to get a mortgage, an appraisal will almost always be a must. That’s right: lenders don’t require inspections that often, but they do insist on an appraisal. At the same time, if you’re going for VA (Veterans Affairs) or FHA (Federal Housing Administration) loans, an inspection will also be mandatory.
The good news is both processes are relatively affordable and don’t require any work on your part. True, appraisals last longer, but an experienced, professional appraiser will be able to determine the true market value of any house and help you save a lot of money. So, do NOT skip on anything if you want to get the best deal!
Is An Inspection or Appraisal Necessary When Buying with Cash?
No, you won’t have to order an inspection or appraisal if you’re paying with cash. In fact, you might choose to deliberately skip this part if you know there are other offers on the house, and you want to get the contract signed as quickly as possible. This is a common practice among home investors and situations when homes are being sold “as if”. With that said, if you’re not rushed by other potential buyers, we recommend ordering both an inspection and an appraisal.
An inspection will help discover real (and, most likely, expensive-to-fix) issues. And with an appraisal, you won’t have to overpay for the house because you’ll have a fair market price for it on your hands.
Which Is the Right Option For You?
If you did some of your own “digging” and are 100% happy with the location, proximity to schools and stores, and the price for the house, an appraisal might not be necessary. Yes, if you’re already ok with the seller’s offer, it won’t be as important. That’s when an inspection will be the right choice. The reason: it will reveal rusty and clogged pipes, malfunctioning furnaces, sagging doors, and other issues.
This way, you’ll save yourself lots of nerves, energy, and money, as the seller will (in most cases) fix the problems found by the inspection. On the other hand, if you know nothing about the area and want to get the best deal possible, an appraisal is a must. An inspection will also come in handy but won’t be mandatory. However, if you’re not struggling with the budget, scratch all that, because inspections and appraisals have proven to be worth the investment, and you can’t really pick one over the other.
Inspections and appraisals are equally important if you’re selling or buying a house. While they’re not always cheap, these services give an objective evaluation of a house. That way, you’ll know the actual market price for it and go from there. Now, while an appraisal is all about comparing prices, features, and curb appeal, an inspection mainly focuses on the condition of the house. That’s why it’s better to use both to protect your financial interest.
Without a thorough inspection or appraisal, you’ll most likely lose hard-earned money on a not-so-perfect deal. Today, we talked about the major similarities between these two options, the differences, and what you can expect. Take your time with it, read the article twice to make sure you’re getting everything right, and check back with us for more guides!
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