What Is The Difference Between An Appraisal & A Home Inspection?
An appraisal and a home inspection are each a report based on an inspection of a property, but the appraisal is for the purpose of determining current market value, and the inspection is used to identify any issues with the condition of the home. Both are essential elements of a home purchase, while an appraisal is also required in a refinance.
More on an appraisal:
The USPAP or Uniform Standard of Professional Appraisal Practice defines an appraisal as, "The act or process of developing an opinion of value."
When you will need to borrow money to purchase a home, the mortgage lender hires a real estate appraiser. The goal is to provide an accurate estimate of the home's overall value. The value is determined by comparing the home in question to recent sales of comparable homes in the area. In order to make an accurate assessment, appraisers analyze similar properties in the market area that have recently been sold. Other factors include the home's condition, the neighborhood, and how long comparable homes have been on the market.
Before approving a home loan application the lender wants to ensure that the home's value is equal to or greater than the amount being financed and fits the requirements of the loan program. If the loan program allows up to 80% of the value of the property to be borrowed than the appraisal must show that the home's value is at least 20% greater than the loan amount.
More on an inspection:
A home inspection is a detailed examination of a home's overall condition. Home inspectors are hired by the prospective homebuyer and work on their behalf. The goal of a home inspection is to ensure that there are no defects within any of the home's structural or systems features.
Although home inspections are not always required, they are strongly recommended. A typical home inspection will investigate the following areas: HVAC, plumbing, electrical, insulation, basement, foundation, roof, attic, ceilings, floors, and doors. If issues are discovered during the inspection, the buyer and seller will negotiate over how they will be handled. The seller could offer a price reduction or repair contingency, the buyer could agree to take care of the repairs after the purchase, or some combination of the two if multiple items are identified.
When you select a home inspector, make sure they have several years of local experience and are certified. Even new homes should be inspected to uncover any code violations, construction defects or maintenance issues.
Please note: The content on AFRMortgage.com is for informational purposes only. It is not a substitute for the advice of a mortgage professional, real estate agent, attorney, tax advisor, or other professional.