Know the Difference Between Appraisals and Home Inspections

Home appraisers and inspectors each play very important functions in setting the stage for real estate sales. Both generate reports that can be used to prevent the buyer from overpaying, but their roles are far from identical. Lenders require appraisals to make sure they don’t approve loans for more than the properties are worth. Appraisers are paid by lenders to help them make sound decisions. Expect a good appraiser to consider such issues as:

• The age and size of the home
• Construction materials
• The condition of the roof and the home’s exterior
• Plumbing and appliances
• The number of bedrooms, bathrooms and closets
• Type of energy used to heat and cool the home
• Energy conservation features, such as solar panels
• The condition of fences and decks
• Building code compliance
• The potential for expansion of expanding the home

Appraisers attempt to look at a home the way a buyer would, taking into consideration any visual flaws that might discourage a purchase. They also will consider the quality of its neighborhood and proximity to schools. The overall health of the local real estate market also will influence their evaluation.

It may seem that appraisals are thorough enough to eliminate the need for the buyer to pay for a home inspection. It’s true that inspectors evaluate many of the same items, but an appraiser normally does not itemize defects or make recommendations for fixing problems. They aren’t as concerned about structural integrity. The appraiser’s focus is on establishing a value for the property. A big part of their job is comparing the seller’s asking price to the price of similar homes that have sold in the in the neighborhood. These comparable sales are called comparables. In overheated real estate markets, appraisers sometimes get caught up in the excitement, appraising homes at inflated values.

Unlike appraisers, inspectors do detailed, hands-on evaluations. They crawl through attics and into crawl spaces to make sure there are no hidden problems that could become unpleasant surprises after the sale. Home inspectors examine all accessible areas. They evaluate both safety and the need for maintenance. If you are armed with a good home inspection report, you can make sure your offer is based on knowledge of the home’s assets and its flaws.

Building bargaining power

If you decide to hire an inspector, be sure to get referrals. Make sure the inspector you hire is knowledgeable about the local real estate market. Finding one who is familiar with your subdivision and builder will ensure more accurate results.

When the inspection is complete, get a copy of the inspector’s checklist and make sure it covers all of the areas you think are important. Ask the inspector to walk you through the home to point out any problems uncovered by the inspection. Ask for recommendations about how to address any defects they identify. These will be important when you return to the seller to bargain for a lower price. A seller who is faced with a negative inspection report often will reduce the price of the home by the amount required to correct the problems.