Appraisal vs. Inspection: Understanding the Difference When Buying a Home
You've just had an offer accepted on your first home, and you're eager to close so you can get moved and settled in. Before you get to the closing table, however, there's still a lot to do.
In most real estate transactions, you must schedule a formal appraisal and home inspection before closing. So, what exactly are these, and what do they entail? Staying informed through every buying process step will help you confidently reach the closing table.
What's a Real Estate Appraisal?
In simplest terms, a real estate appraisal refers to having a property's value determined by an experienced professional. A real estate appraisal aims to ensure that the home being sold is worth at least what the buyer is offering to pay for it. The buyer almost always pays for this service.
But if you and the seller have already agreed on a price, why does the appraisal matter? It matters to your lender if you take out a mortgage to help pay for the home. Understandably, the bank doesn't want to lend you more money than the property is realistically worth.
Ideally, the appraisal on your future home will come back at or slightly above the agreed-upon sale price. If it comes back low, you may need to go back to the negotiation table to get the asking price on the home dropped—or you may need to pay for a larger down payment to offset the difference.
What's a Home Inspection?
A home inspection is another critical service before buying a home, regardless of whether it is new or existing construction. Specifically, a home inspection involves a detailed look at all significant aspects of a home (from roofing and HVAC to electrical and plumbing) by an experienced and skilled professional.
During this service, a home inspector will assess every square foot of a home to look for potential problems. This can include anything from a leaky faucet to a damaged roof. You will receive a detailed report of the inspector's findings from there.
A home inspection on a property before you buy is critical because it informs you about the home's condition and any potential maintenance issues you may need to address. In some cases, you may turn to the seller and ask for them to handle repairs before you move in; you may also be able to ask for a credit to complete the repairs yourself after closing.
Depending on the type of loan you're taking out to pay for your home, your lender may also require an inspection as part of your mortgage terms. You pay for this service as the buyer, so budget around $350.
Get Help With Your Upcoming Move
Appraisals and home inspections are two very different services, yet they are paid for by the buyer and completed around the same time in the buying process. If these go smoothly, you'll be at the closing table and ready to move quickly.
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