Home inspectors examine the enitre house for dangers and structural flaws.
Home appraisals and inspections play a key role in real estate transactions. Because both typically include an inspection of the home, you may think the appraiser and inspector perform the same service. While they both evaluate a home's overall condition, each focuses on a different role in real estate transactions.
Who is the Client?
Home owners and buyers can certainly contract a home appraiser to help them evaluate a fair price for a home. By the time they reach a sales agreement, however, appraisers are typically hired by a financial institution to determine the home's value as collateral for a mortgage. Lenders will ensure a credit risk if the mortgage owner defaults on a loan. When that happens, the bank will try to sell the home to recoup its investment. In contrast, home inspectors work for the buyer, looking for structural or other damages that buyers may not notice when they tour the home. The home inspector delves much deeper into the home's structure and mechanical systems than an appraiser's more casual observations.
Marketability, Structural and Safety
To a degree, an appraiser evaluates a home's condition, but focus on side-by-side comparisons of similar homes to determine how the home fares in a competitive real estate market. Appraisers develop an objective opinion of a home's marketability based on a number of legal and economic factors. Home inspectors investigate the home's structural integrity and the safety of major utility systems. They look for evidence of mold or insect infestation, cracks in the foundation or other defects that may require repairs or renovations. Based on either report, buyers may negotiate new terms with the sellers or decide to walk away from the purchase altogether.
Appraisal Inspections
An appraiser performs a cursory home inspection to determine if a home meets minimum health and safety standards. She evaluates how the home layout uses its space for functional living. After the walk-through inspection, she searches for similar homes that have recently sold. For example, if the subject home is a ranch-style house with three bedrooms and two bathrooms, the appraiser will locate comparable homes with those same features. She will consider upgraded features and assign values for a number of comparable criteria. An appraiser's report helps the bank determine the lending terms for a mortgage, but it can also help a buyer determine if the agreed-upon price is too high in the current real estate market.
Home Inspection Features
Home inspectors survey the entire home for structural or systemic damages. They check out utilities, such as heating and electrical systems and indicate their functional life expectancy. They will report items a buyer should repair or replace. For example, he may point out that an electrical system is unsafe and should be brought up to the current code. Armed with factual information, the buyer can evaluate repair costs that will add to the overall purchase price. Without the home inspection, buyers may discover problems after completing a purchase, too late to negotiate repairs or additional financing options.
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