May home buyers get confused about the difference between an appraisal and a home inspection. While they may seem like the same thing, appraisals and inspections serve two completely different purposes. A home inspection is optional, while an appraisal is required by the mortgage lender. An appraiser is more concerned with the value of the property, and a home inspector is more concerned with the condition of the property. Here is a closer look at the differences between an appraisal and a home inspection.


Home Appraisal

An appraisal is an evaluation of a property’s value based on its condition, features, and similar home sales in the area. Appraisals are conducted by trained, certified professionals who are licensed to determine the value of a home. Getting an appraisal is a standard part of the mortgage process. Before a mortgage lender will loan you money to buy a home, they want to get an idea of how much the property is worth. The following factors are typically considered during an appraisal:

Comparable Properties: Appraisers look at recent sales of similar homes in the area to help determine the market value of a home.  If homes with similar features in the same neighborhood are selling at a particular price, this will influence the assessed value of the home in question.

The Property: A home’s physical features such as the age of the home, its square footage, the number of bedroom and bathrooms, lot size, location, view etc., are all taken into consideration when an appraiser is determining the value of a home. Permanent structures on the property, such as an in-ground pool or sprinkler system also impact the value. However, movable structures like sheds and above ground pools are not included in the valuation.

The Structure: Appraisers look at the overall structure and condition of the home. The quality and condition of things like the foundation, roofing, and siding, are all taken into consideration when determining the value of the property. Appraisers are looking for cracks, damages, leaks and code compliance. The quality of materials used in the structure are also looked at. The higher the quality of the materials, the greater the value.

Interior Condition: An appraiser will look at the material and qualify of anything inside the home that would be left behind if you were to move – walls, flooring, windows, doors, major appliances, plumbing, light fixtures, etc. Other permanent features, such as air conditioning, smoke detectors, security systems and fireplaces are also taken into account when determining a home’s value. Any remodeled or upgraded areas can help increase the appraised value. Homes that need major improvements will appraise for a lower value than those that are in better condition.

Home Inspection

Inspectors take a much more in-depth look at the home than appraisers do. Home inspections are optional, and everything from the foundation to the roof will be thoroughly evaluated to make sure the buyer knows exactly what they are getting into. Unlike an appraiser, home inspectors do not place a value on the home. Inspectors create a report that lets the buyer know the overall condition of the home. They inspect things that you don’t necessarily see in a walk-through of the property. They will check the plumbing (pipes), radon, possible lead paint exposure, any signs of structural issues, ventilation, heating, air conditioning, electrical, drainage, etc. They will also advise you to contact a professional, such as a structural engineer, plumber or electrician if they feel there are any major issues to be addressed. The inspector will provide you with a clear understanding of what is going on with the home and if they foresee any future problems.

The mortgage pros at First Ohio are ready to assist you with each step of the mortgage process, from home inspections to appraisal and more. Contact us today to get started.