Know The Difference Between Appraisals and Inspections

Know The Difference Between Appraisals and Inspections

If you are planning to purchase a home, an appraisal is a very important step in the process. An appraisal is a professional evaluation of the current market value of the home that you are interested in purchasing. In most cases, the appraisal is required by the mortgage lender to verify the value of the home prior to lending you the funds to purchase the home. An inspection assesses the condition of the home prior to you finalizing the transaction. They are both important in the home buying process.

Home Appraisal | As REALTORS®, we advise you to protect yourself by getting your home investment appraised. The appraiser will observe the property, analyze all the findings, and submit a report. The lender usually orders the appraisal to assist in their decision to provide the funds for your mortgage loan (if applicable). When you apply for a mortgage, the unbiased home appraisal is the best way to confirm the value of the home in relation to the sales price. The appraisal will help to insure that the mortgage lender does not loan you more than the home is worth. 

This is very critical in today’s strong seller’s market where low inventory is driving price increases and bidding wars. In this environment, sellers believe that they can set whatever price they want, assuming that competing buyers will be willing to pay more. This only works if the buyer can pay the difference above the home’s value and the sales price. If there is any confusion regarding the discrepancy between the appraisal and the sales price, your REALTOR® will help you navigate any needed additional negotiations.

Home Inspection | The home inspection is your way to determine the current state, condition, and safety of the home before you finalize the sale. If anything in the inspection report is questionable, you have the option to discuss and negotiate any potential issues with the seller before the transaction is finalized. Your REALTOR® is a key expert and advocate for you in this part of the home buying process. 

In today’s seller’s market with multiple offers and bidding wars, a contract with an inspection clause will be more attractive to the seller. Many buyers ask for an inspection for informational purposes only. You can then decide whether to proceed with an offer. 

Bottom Line | Both the appraisal and inspection are critical steps when you are purchasing a home. Contact us today for expert guidance during the entire process.

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