If you are in the market to buy a home, you are probably being bombarded with words like "inspection," "appraisal," "prequalification," "assessed value," or "contingency." But what do they all mean? People keep spouting them off at you like you buy a home every other day, so just keep nodding your head like you understand what's going on, right? Buying a home can be very confusing! Today, I want to focus on two terms that often get misunderstood by buyers when purchasing a home: home inspection and appraisal.
I have heard the terms "inspection" and "appraisal" used synonymously on numerous occasions. These two items
are very different things. As discussed in my last post entitled Home Inspections, an inspection is designed to find major defects associated with a home. A certified home inspector or trusted contractor will perform this task (no license required). An inspection is also a voluntary part of a home purchase. Contrary to popular belief, home inspections are not mandatory in the State of Nebraska. If a buyer elects to purchase a home "as is" (in its current condition) without an inspection, that decision is perfectly acceptable.
In contrast, an appraisal is performed by a licensed
appraiser for purposes of securing a loan. The appraiser is hired by
your lender to review the property and determine a fair market value. The
purpose of the appraisal is to support or reject the sales price of the
property to guarantee that your lender is making a safe investment in
lending you money. The appraised value is a reliable tool for determining the true market value of your property. An appraisal is typically a mandatory part of a home purchase, especially if the buyer is securing a loan through a bank or similar financial institution. Although an appraiser will visually examine the property, he/she is typically not qualified to make a determination about the structural soundness of the
property. An appraiser may comment on specific items of concern in the
appraisal report because of the influence they have on the value of the
property. However, he/she will also note that a qualified inspection
should be performed for items in question.
One important characteristic that a home inspector and an appraiser should have in common is that neither one should be
affiliated with the property or the sale of the real estate in any
way. Appraisers and inspectors should always provide you with an independent, unbiased opinion of the real estate condition or value.
The main differences between inspections and appraisals are as follows:
1. Do not require a licensed inspector
2. Are a voluntary part of the transaction
3. Determine the structural or mechanical soundness of components in the home
4. Are ordered or arranged for by the home buyer
1. Require a State licensed appraiser
2. Are typically mandatory for all transactions requiring a loan
3. Determine the fair market value of real estate
4. Are ordered or arranged for by the lending institution
For additional information on inspections, appraisals, and everything else in between, contact me, Trisha Peters, at firstname.lastname@example.org or (402) 375-1477. I can help you find the answers and the home you have been seeking! Welcome Home.