Here are the main differences between appraisals and home inspections.
What’s the difference between an appraisal and a home inspection? This is an excellent question that many first-time homebuyers ask.
An appraisal’s primary purpose is to tell the bank the value of the property so they can decide how much money they’ll loan to the buyer. The appraiser will check the general condition of the home. With some loan types, if there’s something insufficient in the home, the appraiser will write it down as an appraisal contingency. This means the appraiser is saying the house is worth X number of dollars, as long as these Y things are repaired.
Ordinarily, the things they note are health and safety items such as a broken stove, no running water, a backed-up septic tank, a missing window, etc. FHA and VA loans often do this, and they’re making sure that the buyers can move in and not have any massive expenses right away.
Commonly, on a conventional appraisal, they’ll make note of these things, but it’s up to the buyer and their real estate agent whether they’ll officially make them contingencies. Sometimes though, they won’t make note of them at all, and they’ll only be seen in the photos. Though some of this sounds like what a home inspector does, their job is very different.
A great home inspector is worth their weight in gold.
A home inspector will look at the entire property and go through all the systems with a fine-toothed comb. They’ll run all the appliances, turn on every faucet, assess every drain for leaks, ensure every light switch works, and more. The home inspector will have a deficiency list, which includes things they found inadequate about the house. Some will be things you’ll have to get used to dealing with as a homeowner, such as a cracked light switch plate (which you can replace for about $1).
However, other items will be more crucial, such as a non-working stove, which will have to be fixed before you move into the home. They’ll also tell you when you could expect some items to fail so you can budget for them for the future. If you’re a first-time homebuyer, the inspector will also walk through the house and show you how everything works. They’ll show you where the main water shutoff is, which light switches connect to which outlets, etc. A great home inspector is worth their weight in gold.
If you have any questions about appraisals, inspections, or real estate in general, contact us via phone or email. We’d be glad to speak with you. Today’s question came from Michelle Fulton, and we’ll be sending her a $25 gift card. If you send us a question and we answer it by making a video, we’ll send you a $25 gift card too, so send us some questions!