We all want to get a return for whatever investment we have. Purchasing a home is one of the most significant investments that we will make in our lives; therefore, we should do everything we can to return our investment while reducing the risk. The good news is it is possible to do this even before purchasing our home. The best thing that we can do to maximize the reward and minimize the potential risk is to get an appraisal and home inspection.
You may be wondering about the difference between an appraisal and a home inspection. Well, contrary to what we may have heard, it does differ from each other. While both include assessing the property, the reasons for doing so wholly differ. Aside from that, both benefit the homeowner in entirely different ways.
Let’s Talk About Appraisal
An appraisal is a process used to determine the estimated market value of a home. Almost all mortgage loans require an appraisal. To determine the value of a home, a third-party appraiser will look at different factors such as the home’s location, its condition, and the value of similar recently sold houses in the area where the house is located. After walking through the home and researching comparables, a final appraisal report will be made to determine the home’s market value finally. This will help the lender in making the final decision to approve the loan amount. Typically, the lender cannot lend more than 97% of the home’s appraised value; therefore, you’ll have to pay from your pocket if the appraisal comes back lower than the offer price. Aside from that, you can also renegotiate with the seller or walk away from the deal. However, if the appraised value comes back higher than the offer price, you’ll automatically have more equity in the home.
Let’s Talk About Home Inspection
A home inspection is a process of examining the house to determine its present condition and uncover any potential damage or needed repairs. During the home inspection, the inspector will look closely into the home to determine the real score of the structure, roof, attic, basement, electrical system, plumbing, exterior, and all the other components in their home inspection checklists.
It is suggested that you are present during the inspection to see the house’s condition for yourself. In addition, being present during the inspection will allow you to ask questions to the inspectors. You can also see firsthand the issues, and the home inspector can explain the potential problem that may arise in the future.
After the inspection, the inspectors will provide a written report indicating the real condition of the home and the suggestions for the needed repairs. Through the reports given by the home inspectors, you can negotiate with the seller regarding the price or the repairs needed.
Let’s Talk About the Differences Between Appraisal and Home Inspection
To simply put it, an appraisal determines the home’s value while home inspection determines the home’s condition. Of course, the process is done for different purposes, but it will benefit you as you make one of your biggest investments.
Since the purpose of a home inspection is to determine the real score of the house, home inspectors don’t just rely on the naked eye like the appraisers; instead, they use special devices and training to spot the deeper issues of the house.
Aside from this, it is essential to take note that appraisal is required by the lender while a home inspection is not. Since the lender requires an appraisal, they will be the ones to order an appraisal for you. This is contrary to home inspection, in which you have to choose your home inspection company and set up an appointment with them.
Home inspectors and appraisers are trained with different skill sets. As a result, they have other processes for certification, as well as different areas of expertise.
Let’s Talk About the Things in Common
Appraisal and home inspection may require different processes and serve other purposes; however, both can benefit the homeowner and the lender. Both processes ensure that the home is worth what you’re paying for and safe to live in. Both processes can give you security and ensure that you will be making the right decision whether you purchase the property or walk away from the deal. Surely both processes help you maximize the return of your investment while minimizing the potential risks.