The Difference Between An Appraisal and An Inspection

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When you buy a home, it will go through different processes to make sure that it is ready to be lived in, and also that a lender is ready to lend you or any other borrower money. Herein lies the foundation for the differences between an appraisal and an inspection.

What is the difference between an appraisal and an inspection? Let’s look at what makes each one unique.

An appraisal provides a market valuation of a home. It’s ordered by a lender and is a mandatory part of the mortgage approval process.  Lenders order the appraisal prior to approving a loan to ensure that the value of the home is in line with the amount of the requested mortgage. Often, lenders will require an appraisal, which is a type of valuation, and is a very detailed report completed by a professional licensed to do so. Appraisals examine property factors such as:

  • Location
  • Proximity to schools
  • Size of the rooms and the lot
  • Condition of the home
  • How the home compares to other homes sold in the vicinity

An inspection focuses on the condition of the home, in the present and future. An inspection may or may not be an optional service, depending on the type of mortgage. Inspections will look at things like the condition of the electrical service in the home, longevity of the roof, furnace, water heater, etc… They can provide insight to whether the house has experienced water damage, or if the foundation has issues that should be addressed. An inspection illustrates issues or potential issues with the condition of the home and can be a useful tool at the negotiation table. Inspections are typically done at the request and expense of the buyer. It is easy to confuse an appraisal with an inspection, but they are two different things with two end goals in the home buying process.

 

 

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