Confused between a home appraisal vs an inspection? Keep reading to learn the key differences between the two.
If you’re buying or selling a home, the number of specialists and reports involved in the process can feel daunting.
Although you can find examples of investors buying as-is properties sight unseen, the more common model for residential property transfer involves valuation, appraisal, inspection, and negotiation before closing.
Let’s explore the purpose of appraisals and inspections, what happens during each, how they differ, and how a sell and stay transaction may benefit you.
Home inspections and home appraisals typically start the same way: your doorbell rings, someone shows up to take photos and measurements of your house and property, and then they write up a report.
So what exactly makes these two procedures different? There are four clear contrasts to the site visit itself, as well as why each is performed, who they benefit, and when they occur in the selling process.
A home appraisal is frequently arranged by a prospective buyer’s mortgage lender, or by a homeowner’s lender in front of refinancing or home equity products. The purpose of the home appraisal process is to establish a legally recognized value for the property at a given point in time, usually to confirm its value so it may be used as security in a debt.
A home inspection, on the other hand, doesn’t result in any valuation of the home or property. Instead, its purpose is to closely review the property to identify its various assets or defects. These may include:
Once the overall condition of the home has been established, buyers can use the flaws and benefits to influence their final negotiations and purchase decision.
So, how long does an appraisal take? A site visit for an appraisal can take anywhere from a half hour to several hours, but typically these average around one hour. If you are further wondering, “what do home appraisers look for,” site visits consist of a visual inspection of each room and fixture in the home, as well as the lot and building exteriors.
The home appraiser will take measurements to verify floor plans and square footage, typically taking photographs to document the space. They will also note any visible signs of potential defects such as water or pest damage.
Home inspections usually take longer than appraisal visits, from a few hours to a full day. This is because the home inspector isn’t there to measure and document the property to gauge valuation factors like square footage—they’re looking to establish construction and building materials information to help plan for repairs and maintenance.
The most important goal of an inspection is to uncover any hidden or unknown defects that could significantly impact a home’s current value or future costs. Inspectors do not speculate on home value. Rather, they create a report that includes:
The timing of appraisals and inspections can vary, but they each have a traditional slot in a typical home sale or transfer.
The process related to valuation and inspection usually requires the following stages to close a sale:
Both appraisals and inspections can be requested by multiple parties in a property sale or transfer, but in most cases, they each have a standard role to play.
Under federal law, licensed appraisers are required to remain neutral parties with no financial or personal stake in an appraisal outcome. They do not act for the particular benefit of a home buyer, seller, or lender in terms of the specific outcome of their appraisal report.
Home appraisals may be used by three parties:
Inspections are particularly beneficial for prospective buyers, giving them a forecast of potentially costly repairs and maintenance considerations before finalizing a property purchase. If buyers include an inspection contingency on their purchase offer to a seller, they’ll have the opportunity to negotiate or even back out of a sale if an inspection uncovers unfavorable information.
In this model, inspectors are acting for the buyer’s benefit and may offer suggestions that help them achieve a better outcome in post-inspection negotiations. In some US states, they may also offer recommendations or even services related to repair needs.
Licensed appraisers frequently rely on Fannie Mae’s Uniform Residential Appraisal Report or a similar form that acts as a home appraisal checklist to declare the features, defects, and details of a property.
An appraiser typically records:
However, an appraisal doesn’t start or end with the site visit. In addition to visiting the property, the appraisal process may also include:
A final appraisal report will include an appraised value based on all of these factors. Moreover, if part or all of the property generates rental income, the report can include an income-based valuation accounting for current and potential rent, along with future building maintenance and repair expenses.
If you are further questioning, “how much does a home appraisal cost,” that answer is dependent on a variety of factors including property size, property condition, and more.
While a home appraiser may arrive and leave with only a bit of dust on their hands, a home inspector is typically going to get their hands dirty with the hidden ins and outs of your property.
For instance, in addition to walking through each room, inspectors may enter an unfinished attic space, basement crawl space, or head up to the top of the roof—anywhere that’s safe and accessible to inspect. They’ll be looking to absorb as much information as possible without dismantling anything on the property.
Typically, licensed home inspectors certified by the American Society of Home Inspectors (ASHI) will inspect the presence and condition of:
They’ll also be on the lookout for visible evidence of certain structural or chemical hazards, such as:
However, inspectors cannot certify the presence or absence of these hazards alone. Potential buyers or homeowners can request (and pay for) additional home inspections from specialists to verify defects and the risks they pose.
At the end of standard home inspection services, prospective buyers should have a report that supports further price or repair negotiations, if appropriate. This will serve as the foundation for their new home’s maintenance record.
For many homeowners, their property is the biggest asset they own, and converting that asset to cash through a home sale is the key to unlocking future plans. But leaving a home you love and searching for a new one can just add to expenses and stress.
With Truehold’s sell and stay transaction, you can unlock your home equity without leaving your home. You sell, cash out your equity, and continue living in your home as a renter while we cover essential repairs, property tax, and property insurance. That way, you can dedicate your budget to your personal and financial goals.
If you’re dreaming of a new business venture, travel, or retirement plans, a sell and stay transaction can give you both capital and relief from homeowner responsibilities. To discuss your options and help decide whether Truehold is the right fit for you, call a representative today at (314) 353-9757 to get started.
Sources:
1. Fannie Mae. B4-1.2-01, Appraisal Report Forms and Exhibits (04/06/2022). https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B4-Underwriting-Property/Chapter-B4-1-Appraisal-Requirements/Section-B4-1-2-Documentation-Standards/1032991831/B4-1-2-01-Appraisal-Report-Forms-and-Exhibits-07-03-2019.htm
2. The Mortgage Reports. Home inspection checklist: What do home inspectors look for? https://themortgagereports.com/37715/home-inspection-checklist-what-to-expect-on-inspection-day
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