Home Inspection vs. Appraisal: What’s the Difference?
Home inspection vs. appraisal… if there even a difference?
If you’re here for a quick answer, here it is:
Home inspections determine the current condition of your home.
Home appraisals determine the value of your home so your lender can justify loaning you money for it.
It’s Not Home Inspection vs. Appraisal…
While this is a commonly searched phrase, it’s not quite the right way to think about it.
You need both. They each serve their purpose.
A home inspection comes shortly after you get an offer accepted. This is an independent 3rd party that you hire to inspect the home’s major systems and components.
It’s partly for you to understand your future home’s condition and partly to help you negotiate with the seller on any concessions or credits for repairs. Note: If it’s a seller’s market, where home prices are rising, and not a lot of homes are on the market, you may not be able to ask for much.
A home appraisal comes once you are past the home inspection and loan acceptance phases. Your lender outsources this to determine the value of the home, as compared to recent sales. This gives them the confidence to provide you with the loan at the current valuation.
What Does Each Cost?
We go in-depth in this article, but you should budget at least $400 for a standard home inspection. The cost will vary by home size, attributes, and various other factors.
Additional insurance inspections or pest/termite inspections will be an extra couple hundred. This cost is paid out of pocket by the buyer and well worth the price. You can only imagine the things we see and educate our clients on.
An appraisal can run about the same price as a home inspection, but this generally rolls into your closing costs.
At the end of the day, you shouldn’t really be comparing home inspections vs. appraisals. They are both essential to make sure your investment is a solid one. You’ll find they serve very different purposes. You’ll better understand the values and risks that come from being a homeowner.