Whether you’re a buyer or seller, it’s easy to confuse an appraisal with a home inspection. After all, both involve a professional visiting your home and assessing the area.

There are, however, key differences between an assessment and an inspection, particularly regarding the purpose of the visit itself. In short, an assessment helps you understand how much is a house worthwhile an inspection helps you understand its condition. Here, we outline some of the key differences between a home appraisal and a home inspection.

What is a home appraisal?

An assessment is a process used to determine value of a house. Usually, if the buyer is seeking financing for the purchase, the bank or mortgage lender will require the property to be appraised. This ensures that the property is not worth less than the loan amount – a risk no lender would be willing to take.

During a house assessmentAn appraiser will conduct a walk-through of the home you’re looking to buy to assess the property’s features (like the number of bedrooms and bathrooms), as well as any improvements or renovations that might have affected its value. The appraiser will also look at comparable properties in your area, or compositionsto compare with what other similar homes have sold for, and can also take into account details of the entire neighborhood.

Using this information, the appraiser will then write an appraisal report with their estimate of the home’s current market value. The lender then uses this amount to determine the loan amount it will approve. Typically, you won’t get a mortgage for more than 80% of the appraised value of the property. If the appraisal is low, i.e. if the appraised amount is less than the loan amount, then valuation gap will have to be compensated by the buyer, otherwise it could even derail the transaction.

The buyer usually pays the evaluation costwhich is usually between $300 and $400 and is paid as part of the transaction. closing costs.

When is an assessment necessary?

If you are financing the purchase of your home, an appraisal will almost certainly be required: mortgage lenders generally insist on an independent appraisal to confirm the value of a property before approving financing. Some lenders also require a evaluation for refinancing.

What is a home inspection?

A home inspection involves a professional inspector – often someone licensed or certified by the state – visiting the home and thoroughly evaluating its condition. The inspector is not looking for the value of the house, but rather its physical condition. Inspectors examine the house for any damage, danger or other problem, existing or potentially imminent. They typically examine the home’s HVAC and other major systems, access the basement, attic, crawl spaces, and examine both the roof and foundation.

Although the buyer does not technically need to be present for the home inspection, their presence can be helpful. The inspector can approach every room of the house with you and explain the seriousness of any problems that arise. This is also an opportunity for you to ask questions about anything that might be on your mind.

This process may take a few hours or more, depending on the size, age and condition of the home. The inspector then produces a written report, giving his opinion on the property and noting any damage. A home inspection contingency is often included in the purchase agreement of the transaction, meaning that the purchase is contingent on the findings of the inspection. If it reveals major structural problems, for example, the buyer can ask for a reduction in the price of the house or ask the seller to pay for repairs – and they may have the right to withdraw from purchase quite.

When is a home inspection required?

Home inspections are generally not required by lenders. But they are extremely useful in helping the buyer fully understand the condition of the home, as well as the likelihood of future problems, before closing the sale.

In most cases, it is the buyer or his agent who will hire the inspector and schedule the visit. The buyer in general pays for the inspectionwhich will cost about the same as an appraisal: around $300 to $400.

Assessment or inspection: main differences

Both processes involve a qualified professional examining a home before it changes hands, and both can reveal potential issues that could affect the sale. They also cost about the same amount. But home appraisals and inspections have some very important differences:

• Aim: The purpose of an appraisal is to determine the monetary value of a home. This can be influenced by its condition, but also depends on factors such as the local real estate market and comparable properties nearby. Whereas a home inspection focuses solely on the condition of the home, to ensure that it is in good condition and safe to occupy.

• What is considered: Appraisers will consider factors beyond the house and land, including the neighborhood, surrounding area, and the sale price of nearby homes. However, an inspector is only interested in the property and its functionality and safety.

• Who is present: A home appraisal is typically conducted without the buyer or seller present, with the appraiser revealing his findings to both parties and the lender once his report is completed. Instead, the buyer is often encouraged to walk through the home with the inspector so he or she can ask questions and understand any problems.

• Who is affected: Appraisals occur primarily between a buyer and the buyer’s lender – their primary goal is to reduce the lender’s risk relative to the loan amount – while home inspections occur primarily between the buyer and seller. However, both services can have a potential effect on the final sale price of the home and, in this sense, all three parties could therefore potentially be impacted.

How Sellers Can Prepare for Both

If you are selling your home, there are a few proactive steps you can take to ensure a smooth home appraisal and inspection. Both are important if you want to close relatively quickly and easily.

Ideally, you want the inspection not to reveal any issues that could cause problems on your way to the closing table. To prepare, consider doing any repair work that you already know needs to be done. It is also helpful to provide copies of all relevant documents to the inspector and ensure they have easy access to areas that will need to be assessed, such as crawl spaces and electrical boxes.

When it comes to appraisal, while you can’t control outside factors, like your local components and market conditions, you can make sure your home itself presents well. If you made any improvements while you were there, such as a remodel or kitchen addition, have documents and permits ready. Also make sure that the lawn and trees on the grounds are trimmed and tidy, and that the interiors are clean and well maintained.