The Difference Between an Appraisal and an Inspection

What is an Inspection? What is an Appraisal?

One of the unexpected aspects of purchasing a first home is the need to learn, what seems like, a whole new language! Many first time home buyers can get overwhelmed by the terminology used by professionals in the real estate business.

One of the things I love most about working with first time home buyers is the opportunities to educate.

Today I’ll explain the difference between two very important evaluations that will be done in almost every transaction- the Appraisal and the Inspection.

The Inspection:

As a home buyer, obtaining an inspection is both a privilege and a right! A home inspector will look at a house’s HVAC system, interior plumbing and electrical systems, roof, attic, floors. windows and doors, foundation, basement and structural components. The inspector will provide a verbal and written report with his/her findings. They home buyer has the option to attend the inspection. I find when buyers do attend find it a great opportunity to learn tip about home maintenance and even to learn where important electrical, plumbing, HVAC etc items are located. Attending the inspection also allows the buyer an additional opportunity to  explore their new home in detail and ask questions.

An inspection is not “required” for the transaction to complete. However, I ALWAYS strongly recommend my clients have a thorough inspection done for their own peace of mind.

What if the Home Inspection Fails?

I’ve often heard first time home buyers ask this question or some form of this question:

“What if we have a bad inspection?”

“What if the house fails the inspection?” etc…

The truth is, EVERY house will have items show up on the inspection. The average home inspection report is at least 20 pages long! The question becomes “Are the items in the inspection report items I can ask the seller to fix, fix myself, hire someone to fix or live with?”

I help my clients navigate this part of the process. We will review the report together and reach a decision that either leads to a continuing the deal (by passing the inspection objection), a negotiation (submitting an inspection objection to the seller, or a termination of the contract (inspection termination).

Choosing a Home Inspector

Because home inspectors in Colorado do not have any licensing requirement the cost and extent of a home inspection can vary greatly based on the inspector’s experience, education and investment in the field. There are various National Societies that inspectors can choose to be members of  such as

• the American Society of Home Inspectors (ASHI)
• the National Society of Home Inspectors (NSHI)
• and the National Association of Home Inspectors (NAHI).

It’s important to choose a reputable inspector who is both qualified and trusted. I have inspectors that I trust and have worked with over the years and I’m happy to refer them to my home buyers.

Can the Home Seller do an Inspection?

Another interesting note about inspections relates to the seller doing an inspection. It is sometimes recommended that the seller do a “pre-inspection”. There are pros and cons to doing a pre-inspection and I will address those in an upcoming blog post. For now, just know that there are times it makes sense to do a pre-inspection. I always discuss this option with my listing clients, and we will make a decision together if this is the right direction to take.

As a buyer, if a pre-inspection has been done, you can decide if you’re OK using that inspection or if you’d like to perform your own. Again, we will discuss this together based on the specific home and circumstances.

The Appraisal:

If you are using a loan to purchase your home than your lender/the bank will likely require a Home Appraisal. A home appraisal is an unbiased estimate of the true (or fair market) value of your home. Your lender will order and schedule the appraisal with the deadlines from the original purchase contract in mind. The cost of the appraisal is a negotiable item and can be paid for by the seller, the buyer or both. In Colorado, I most often see the buyer paying the cost of the appraisal because it is a requirement of his/her lender. You will not attend the appraisal, but you will be sent the results once it is complete. Receiving the results usually takes a few days after the appraiser visits the property.

Why do I need an Appraisal?

The purpose of an appraisal is to provide an ‘independent and impartial analysis of real property,’” according to NAR. The appraiser’s client is the lender. However, ultimately the appraisal protects a buyer against paying more for a home than it’s worth.

What do I do with Appraisal Results?

The appraisal will either come back lower than, at, or higher than the contract price. This is a point at which I will work with you to evaluate next steps and, if necessary, a plan for negotiation.

If you have further questions about what an inspection or appraisal is or how they protect you in the process of buying a home, please feel free to email or call me any time. I’d be happy to talk to you!  If you’re ready to take the next steps in your home buying process and you’d like a Realtor that takes social responsibility and impact to heart…know that I will advocate for, support and educate you every step of the way and  I’d LOVE to be considered for the job!

Sincerely,
Jessica