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Difference Between Inspection and Appraisal

Inspection and appraisal are two essential prerequisites of every real estate transaction. Both of these disciplines involve the evaluation of a characteristic as it relates to a specific requirement. Every real estate transaction goes through the inspection and appraisal process because your property is now a product which needs to be evaluates first before being sold. Inspection and appraisal can be conducted as a verification of compliance to some kind of requirement activity of a product, which in this case, is your property or home. Both sellers and buyers often confuse inspection with appraisal as if they are the same thing, but in fact, they are very different.

Appraisals are for lenders, whereas home inspections are for buyers. A home inspection gives the buyer an impartial, physical evaluation of the overall condition of the home; it’s more like an analysis of the structural condition of the property by an engineer or a certified consultant. Inspection is a fundamental way to determine compliance to a quality requirement and to make a disposition of the acceptance criteria. Appraisal, on the other hand, is done to determine the estimate value of the property or house and to make sure the property is marketable. Remember, appraisals are very different from home inspections, so it is important to understand the two.

 

What is Inspection?

Home inspection is an additional step and a prerequisite in the real estate transaction. It is a pre-purchase activity carried out by a qualified inspector who takes an in-depth look at your property or home to evaluate the physical condition of the property or home such as structure, construction and mechanical systems. The inspection gives the buyer a physical evaluation of the overall condition of the home that would include a detailed report on the condition of the structural components like exterior, roofing, plumbing, electrical, heating, insulation and ventilation, air conditioning and interior components. Normally the home inspection takes place within the first ten days of the real estate purchase contract. After the site inspection is done, appraisal process starts.

 

What is Appraisal?

The appraisal is a qualification assessment designed to determine the service capability of the property and to ensure that all performance standards have been assessed in prior. An appraisal is performed to estimate the value of the property, rather than establish its physical condition. Appraisals may involve a qualified and certified inspector of a property, but with the goal to determine the market value of the property. The appraisal is jointly conducted by financial and technical officers to determine the different financial, technical, and marketing aspects of the proposal. Appraisers often find problems in house and may call upon home inspectors to perform a thorough inspection in order to investigate situations that are unclear to the appraisers.

 

Difference between Inspection and Appraisal

  1. Meaning 

– A home inspection is a valuable indicator when deciding to buy a home or property. It’s an examination to determine the physical condition of the property or home, often in connection with the sale or purchase of the same. A home inspection gives the buyer an impartial, physical evaluation of the overall condition of the home. An appraisal, on the other hand, is a process to determine the estimate value of what the property or home is worth. It is an impartial written estimate of the market value of the property or home.

  1. Goal

 – The inspection gives the buyer a physical evaluation of the overall condition of the home that would include a detailed report on the physical condition such as structure, construction and mechanical components of the home. The goal is to give the buyer all the information needed to make an informed decision on the purchase. The goal of an appraisal is to assess the market value of the home to make sure the seller does not attempt to quote a higher price more than the house is actually worth.

  1. Professional 

– Home inspections are usually conducted by certified inspection companies or professional independent home inspectors who have all the expertise and required certifications to perform home inspections. The job of a home inspector is to provide a detailed report on the overall condition of the home. The professional real estate appraiser estimates the market value of the property or home usually in writing simply stating the appraiser’s estimated value through a thorough inspection of the appraised property, its geographical area, and economic trends.

  1. Fees

 – A home inspection requires a detailed analysis of the structural condition of the property by a professional and an average home inspection costs anywhere between the $300 and $350 range, depending on the size of the property or home. Home inspection of larger homes, more than 2000 sq.ft may cost around $350-$400. Appraisal fee pays for the appraisal of the home you want to purchase or refinance, which is often around $300 to $500. Large homes or unique properties typically cost more to appraise.

Inspection vs. Appraisal: Comparison Chart

 

Summary of Inspection vs  Appraisal

In a nutshell, an appraisal is quite different from a home inspection. Appraisals are for lenders, whereas inspections are for buyers. The lender does an appraisal to determine the estimate value of a house and to make sure the house meets FHA minimum property standards and is marketable. A home inspection simply gives a detailed report of the physical condition of the house to help you make an informed decision on your purchase. A home inspection gives the buyer an unbiased, physical evaluation of the overall condition of the house and items that need to be repaired or replaced.

 

Sagar Khillar

Sagar Khillar is a prolific content/article/blog writer working as a Senior Content Developer/Writer in a reputed client services firm based in India. He has that urge to research on versatile topics and develop high-quality content to make it the best read. Thanks to his passion for writing, he has over 7 years of professional experience in writing and editing services across a wide variety of print and electronic platforms.

Outside his professional life, Sagar loves to connect with people from different cultures and origin. You can say he is curious by nature. He believes everyone is a learning experience and it brings a certain excitement, kind of a curiosity to keep going. It may feel silly at first, but it loosens you up after a while and makes it easier for you to start conversations with total strangers – that’s what he said."

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References :


[0]Image credit: https://pixabay.com/illustrations/audit-tax-inspection-auditor-3929140/

[1]Image credit: https://commons.wikimedia.org/wiki/File:Performance_appraisal.jpg

[2]Ventolo, William L. and Martha R. Williams. Fundamentals of Real Estate Appraisal. Chicago, Illinois: Dearborn Real Estate Education, 2001. Print

[3]Dunlop, Carson. Essentials of Home Inspection: Communication and Personal Practice. Chicago, Illinois: Dearborn Real Estate Education, 2003. Print

[4]Gookins, E.F. Achieving a Safe and Reliable Product: A Guide to Liability Prevention. Milwaukee, Wisconsin: ASQ Quality Press, 2011. Print

[5]Bell, W. Frazier. How to Get the Best Home Loan. Hoboken, New Jersey: John Wiley & Sons, 2002. Print

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