Are you planning to buy a home? If so, then an inspection is a crucial step in the process that should not be overlooked. The inspection assesses the condition of the home before you finalize the transaction. It’s important to note that an inspection is different from an appraisal, which is a professional evaluation of the market value of the home you’d like to buy. In most cases, the lender orders an appraisal to confirm or verify the value of the home prior to lending a buyer money for the purchase.
Let’s take a closer look at each one and understand why both are important when buying a home.
Home Inspection
The key difference between an inspection and an appraisal is that while an appraisal helps you understand a home’s value, inspections help you understand a home’s condition. During a home inspection, a professional inspector evaluates the current state, safety, and condition of the home before you finalize the sale. If there are any potential issues or repairs found during the inspection process, you as a buyer have the option to discuss and negotiate with the seller before the transaction is final.
Home Appraisal
A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the home based on the sale price. Regardless of what you’re willing to pay for a house, if you’re using a mortgage to fund your purchase, the appraisal will help ensure the bank doesn’t loan you more than what the home is worth.
This is particularly important in today’s sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward. In such a scenario, the seller may set an unrealistic price for their house under the assumption that competing buyers will be willing to pay more. However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check.
In conclusion, both an inspection and an appraisal are essential steps in the home buying process. While the inspection helps you understand the condition of the home, the appraisal ensures that you are not overpaying for the property. Make sure to work with a trusted real estate agent who can guide you through each step of the process and help you make an informed decision.
