While both services assess properties and provide key information that could affect the home’s value, they have different objectives and benefits for home buyers and sellers.
Here, we’ll take a closer look at the main differences between a home appraisal and inspection, and how each one can benefit you as either a home buyer or seller.
WHAT IS A HOME APPRAISAL?
A home appraisal is a prerequisite for many mortgage loans. Its main function is to provide a property’s estimated value. By law, they’re performed by licensed third parties that are not involved with mortgage companies. Various factors like the home’s location, current condition, and value of comparable homes that have recently sold in the area (also known as comparables or comps) are taken into account by the appraiser to determine a fair value.
Licensed appraisers use different ways to collect information on a home. Common methods include conducting a walkthrough to examine the property, gathering information online, or working with third parties tasked to gather information onsite. Some appraisers also conduct summary appraisals or “drive-by” appraisals, which involve assessing a property from outside to estimate its market value based on its exterior condition, the surrounding area, and official real estate records.
After making notes, taking photos, and surveying comparable properties, the appraiser will review all of the information and materials they’ve collected to estimate a home’s appraised value and finalize the appraisal report.
Key Benefits for Buyers
- It ensures that you will be receiving a fair mortgage loan amount from your lender.
- It can be used as a negotiation tool for lowering the price and getting better terms on the home.
- It can eliminate the need to purchase private mortgage insurance.
Key Benefits for Sellers
- It helps sellers set a realistic asking price.
- Conducting an appraisal in advance streamlines the transaction, preventing delays and unexpected issues during the financing process.
- An appraisal report provides legal protection for sellers in case of disputes.
WHAT IS A HOME INSPECTION?
An inspection is a thorough examination of a home before it enters the market. It assesses the property’s current condition and reveals any potential red flags. The inspector will examine the home’s key aspects like its structure, plumbing and electrical work, heating and cooling systems, and exteriors to ensure that all are in good condition and are functioning accordingly. The home’s overall condition will also be assessed for damages, fire hazards, safety issues, and other factors that could negatively impact its value.
The main difference between an inspection and an appraisal is that an inspection focuses on the condition of a property, while an appraisal’s basic purpose is to accurately assess a home’s value.
Key Benefits for Buyers
- It identifies major issues with a home and its associated costs, helping buyers make a more informed decision.
- It helps make the buying process smoother.
- It minimizes repairs after closing.
Key Benefits for Sellers
- Gives an accurate view of a home’s condition, helping sellers set an appropriate price.
- It sets expectations for prospective buyers by providing proof of the home’s condition.
- It can be used as leverage for negotiations if the home is in good condition.
Home appraisals and inspections are integral parts of any real estate transaction. Now that you know the benefits provided by each one, you’ll be in a better position to realize your real estate goals.
Searching for homes for sale in Decatur? Please feel free to get in touch with Chad or Christina today. You can call/text us at 404.944.6577 (Chad) or 404.932.7388 (Christina), or send us a message here.