How Does a Home Appraisal Differ From a Home Inspection?
Purchasing a home can be a tedious but rewarding endeavour. It can be a worthwhile investment if you seek guidance from the onset and follow some key steps.
When it comes to your dream home, getting a residential appraisal and a home inspection are non-negotiable steps. Many believe they are the same, but a residential appraisal and a home inspection differ in the following ways:
A house appraisal is a process that determines the estimated market value of a residential property. The appraiser considers the property’s location, special features, proximity to desirable amenities, general condition and the prices of similar recently sold houses in the neighbourhood.
On the other hand, a home inspection requires a thorough examination of a property to determine its condition. The examination will include an inspection of the yard, plumbing, roof, windows, electrical wiring, attic and other areas and aspects.
The parties involved
You as the buyer, your mortgage provider or lender, the seller and of course, the appraiser are the key players in the residential appraisal.
Your appraiser will create an appraisal report after walking through the home and researching comparables. This report will be useful to the lender who needs to know the home’s market value before approving the loan.
What if the residential appraisal is lower than the offer price? In this instance, you can either pay the difference, renegotiate with the seller, or cancel the deal. If the appraisal is higher than the offer price, consider it a major win because you’ll have more equity in the home.
When it comes to the home inspection, the participants are the seller, the home inspector and the buyer. You, the buyer, stand to gain the most from a home inspection as it helps you decide if the home is right for you.
During the process, you will do a walkthrough with the home inspector, who will point out issues and reveal problems that may arise later. After this, you’ll receive a report that describes what was inspected and lists all the problems that need fixing. You can use the findings to decide if the seller should complete the repairs or if you will pay for them.
Other key differences
There are additional points that widen the gap between a residential appraisal and home inspection, such as:
- Home inspectors can identify issues that may not be obvious to the untrained eye. House appraisers, on the other hand, focus on the general appearance of the property.
- House appraisals are often mandatory for the mortgage provider. Home inspections aren’t. It’s up to you to make arrangements for a home inspection, whereas your lender or mortgage broker will be responsible for ordering the residential appraisal.
- The home inspector will highlight issues and provide clarity during the walkthrough, but a house appraiser will not share their findings until they complete the report, and often those findings are only available to be viewed by the lender who requested the appraisal.
- The mortgage amount is determined by the house appraisal, not the inspection.
- As the potential buyer, you are encouraged to walk through the house with the home inspector as they do their assessment, whereas a house appraisal doesn’t require you to participate in the walkthrough.
Do you need both?
We’ve established that a residential appraisal is crucial to the entire process as it helps you get approved for a loan and ensures that you are paying the right price for the house. A home inspection may not be useful to a lender, but it will certainly give you peace of mind. You’ll have a complete understanding of your home’s intricacies and a full disclosure as it pertains to its condition. You can opt out of the deal or renegotiate based on the home inspector’s findings.
It is incumbent on you to do both a residential appraisal and a home inspection. After all, a house is one of the most expensive purchases you’ll probably make.
Appraisals in Vancouver
There are many concerns when buying a home. Adlaw Appraisals will ensure that you have one less thing to worry about. We promise to deliver the accurate findings you need to make an informed decision when house hunting. Give us a call today.