Do you know the difference between a property appraisal and an inspection? Surveys show that many home buyers – even those who have purchased homes before – are confused about these two key aspects of a home purchase.
Appraisals are designed to estimate a property’s value based on a number of different factors. They are typically ordered by lenders to make sure they don’t approve mortgages for more than properties are worth. Home buyers who are purchasing homes with all cash often order appraisals, too, to make sure they aren’t overpaying.
Depending on how detailed an appraisal is ordered, the actual process can take less than one hour to two or more hours. Appraisers typically document and photograph property amenities, inside and out. Appraisal reports typically include a minimum of three comparable sales of nearby properties. While an appraisal can give a home buyer a good idea of a property’s fair market value, it is no substitute for a home inspection.
A home inspection, by comparison, is a detailed, hands-on evaluation of a property. Inspections are typically paid for by a home buyer, not a lender. While a home appraisal is virtually a mandatory part of the home buying process if you’re taking out a mortgage loan, a home inspection is entirely voluntary. Inspectors are looking for defects and hidden problems, such as a bad roof, structural problem or leaky pipes that could lead to costly headaches down the line.