Inspections and appraisals are two common terms used in real estate transactions. Both are processes that help determine the present condition and value of a property, explains rmxipm.com. The fundamental difference between the two is that an inspection looks for function while an appraisal looks for value.
It’s necessary to perform both of these processes before buying or selling a home.
In today’s article, we will go in full depth to help you understand what these two critical terms mean in real estate.
What is a Home Inspection?
A home inspection is a limited, non-invasive examination of the condition of a home. The goal of a home inspection is to help a potential home buyer make an informed decision about the property’s condition.
On average, a home inspection will set a potential buyer back by about $400. This cost, of course, varies depending on various things, such as the size and location of the property.
What do home inspectors look for?
Flawless home inspections are virtually unheard of. The truth of the matter is that almost every home will have a list of issues. In fact, according to data from the National Association of Realtors, 25 percent of all home sales get delayed during closing. And, 16 percent of those delays are caused by home inspections.
The following are typical things a professional home inspector will cover.
•HVAC system: Home inspectors will check to ensure that all basic components of the HVAC system are working as they should. Some of the possible defects that he or she may include in their report include cracked ductwork, rust around the unit, and dirty air filters.
•Insect & pest infestation: Termites, carpenter ants, and certain types of beetles are amongst the most common wood-destroying insects. A home inspector will look to see whether these have caused any damage to the home.
•Plumbing problems: Water is every homeowner’s worst enemy. What’s even worse, plumbing issues aren’t always easy to notice. A home inspector will check for plumbing issues such as sediment build-up, high water pressure, hidden leaks, clogged sewer lines, and broken or rusty pipes.
•Electrical system problems: Electrical problems are among the leading causes of home fires. A qualified home inspector will make sure that both the buyer and seller are aware of any electrical issues a home may have.
Some common electrical issues include missing knockouts in panels, lack of GFCI protection, improperly modified electrical panels, reversed polarity, and exposed wiring and splices.
•Roof damage: A damaged roof can have serious negative effects on the entire property. Some of the things an inspector will be in the lookout for include moisture in attic or ceiling, soft spots, excessive algae growth, cracks or rust, loss of texture on shingles, buckled and missing shingles.
•Failing foundation: The foundation is an important structural component. It, essentially, holds everything else above it. If it’s compromised, then it may mean that your entire home’s structural integrity is compromised as well. A professional inspector will make sure to examine it.
That said, home inspectors don’t check everything. Broadly speaking, they won’t check for things like roof critters, floor creaks, unstable soils, warped floors, and insulation voids.
What is a Home Appraisal?
An appraisal is an unbiased, professional estimate of the value of a property for sale. They help determine if the asking price is lower or higher than the actual value of the property. Appraisals come into play when one is looking to buy a home and finance it through a mortgage loan.
The appraisal process is conducted by a licensed residential appraiser. On average, it will cost you about $300 and $400 to hire a professional appraiser on a single-family home. Expect to pay at least $200 more for a multi-family building.
The costs could be more, of course, depending on various factors like the property’s size.
What do appraisers look for in a house?
The following are a couple of things an appraiser will look for when determining the value of a property:
•The size of the home
•Number of bedrooms and bathrooms
•Materials used for windows, floors, and walls
•Whether there is a full or partial attic, crawl space, or basement
•The type of foundation
•General maintenance and upkeep
•Any physical deficiencies or adverse conditions that potentially impact the property’s livability
Other things an appraiser will factor in their valuation report include:
•Whether the property has public utilities
•The size of the lot
•The zoning classification
This process, depending on the property’s size and condition, can be a quick 15-minute visit or a 2-3 hour examination.
There you have it. The main differences between an inspection and appraisal when it comes to real estate transactions. Understanding them is critical if you are in the market looking for a new home.