Whether you’re buying or selling a home, an inspection and an appraisal will be part of the closing process. They are both important steps that help to evaluate your home before the transaction is finalized. If you’re new to the real estate process, then it can be unclear how these two steps are different from each other. Let’s break it down.
What is a home appraisal?
Let’s begin with the appraisal. When you buy or sell a home, a home appraiser will determine the value of the home. These experts use several pieces of data to arrive at that number. They will look at where the home is located, how big the home and the lot are, and the condition of the property. They will also look at the recent selling prices of comparable homes in your neighborhood. During the appraisal, they’ll be looking for signs of neglect like damaged flooring, broken windows, and cracked walls. While the overall cleanliness of the home is not an issue, underlying problems caused by neglect can affect a home’s value. If a home is appraised for less than the purchase price, it can determine whether or not the transaction can proceed. The seller may need to reduce the price, or the buyer may need to increase their down payment to offset the discrepancy.
What is a home inspection?
A home inspection is somewhat similar to an appraisal in that it also evaluates the condition of the home. A home inspector will look at various elements of the home including the HVAC system, plumbing, electrical work, and sewage. They will also look for signs of fire, water, or insect damage. Home inspectors are hired by the buyer and the buyer receives a written report of the inspector’s findings. The inspector will make suggestions of needed repairs and any other concerns that they have about the condition of the home. Home inspections are typically conducted after the sales contract has been signed. These contracts will often contain inspection contingencies that give buyers leverage for further negotiations or to cancel the sale if need be.
What are the real differences?
While these two steps in the closing process have many similarities, they also have key differences. An appraiser’s main function is to determine what the value of the home is. It helps the lender evaluate the terms of your loan and to make sure you haven’t agreed to pay more than the home is worth. On the other hand, an inspection helps to educate the buyers about the condition of the home they are purchasing. It lets buyers know what problems currently exist within the home and repairs that may need to happen in the near future. Buyers are often present during a home inspection. However, home appraisals tend to happen behind closed doors.
What’s the bottom line?
When you’re buying or selling a home, the closing process can be confusing — especially if you’re doing it for the first time. That’s what it’s so helpful to work with a real estate professional. Having an expert on your side will give you the knowledge and confidence you need to successfully close on the home. Contact us today!
Compliments of Greco Real Estate