If you’re planning to buy a home, the home inspection and appraisal are important steps in the path to home ownership. But there is a key difference between an appraisal and an inspection: “In simplest terms, a home appraisal determines the value of a home, while a home inspection determines the condition of a home.” Here’s the breakdown of each one and why they’re both important when buying a home.
Appraisal
The home appraisal is a professional evaluation of the market value of the home you’d like to buy. In most cases, when you apply for a mortgage, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase.
Regardless of what you’re willing to pay for a house, if you’ll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth. This is especially critical in a sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward.
When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more. However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check.
Home Inspection
The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process – like the age of the roof, the state of the HVAC system, or just about anything else – you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your real estate agent is a key expert to help you through this part of the process.
Bottom Line
The appraisal and the inspection are critical steps when buying a home, and you don’t need to manage them by yourself. Let’s connect today so you have the expert guidance you need to navigate through the entire home buying process.