Appraisal vs. Inspection

Home appraisals and home inspections are two very different things. The lender will require a home appraisal be done on the home whether it is a purchase or a refinance, whereas a home inspection is not required by the lender. Some people choose not to do a home inspection, however we do not recommend this.

What are the differences?

A home inspection will take a much more in-depth look at the home itself from the foundation to the roof and everything in between. After inspection the inspector will write up a report with his or her findings. This report may be several pages long and may include items needing attention. The home inspector will not place a value on the home; he or she will only determine the function of the home.

A home appraisal, while they will also review these items, the appraiser will only address obvious issues. The appraisal is to determine the market value of the home. The steps for an appraisal are:

Inspection: A licensed and lender approved appraiser will make an appointment to see inside and outside of the property.
Comparables: After inspection the appraiser will then do research on similar homes in the area and find recent sold prices to help determine the market value of your home.
Report: After compiling the data from the inspection and the research on the “comps” the appraiser will then write up a report to support the determined market value.

The report will be compiled of photos of the property and will let the lender know the property does exist at the correct address and is in livable condition. A measurement of the land area of the property as well as the square footage of the home will also be included, which can often vary from public records if an addition has been added. The appraiser will make note of any upgrades as well as any damage to any room. Both may affect the value of the home.

There are many other items the appraiser will put in the appraisal report pertaining to your property. Ask for a copy of the appraisal as they can be interesting to read and you might find out something you did not know about your home. If you have questions, please ask your mortgage professional to help you understand.