Article about home inspection vs home appraisal and the difference between the two.

If you’re planning to buy an Arizona home, an appraisal is an important step in the process. It’s a professional evaluation of the market value of the home you’d like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase. It’s also a different step in the process from a home inspection, which assesses the condition of the home before you finalize the transaction. Here’s the breakdown of each one and why they’re both important when buying a home.

Home Appraisal

Getting a home appraisal in 2021? Be ready,  homes are appraising, and some homes are not.  Many homes are appraising for thousands under what the home owners believe they can get from there house.  On the other hand we have buyers willing to waive the home appraisal contingency and pay the difference of what the lender won't lend on the home.  That can take a significant amount of cash recourses, but we are seeing this in 2020 and 2021.  

The National Association of Realtors (NAR) explains:

“A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lender’s decision to provide funds for a mortgage.”

When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the Arizona home based on the sale price. Regardless of what you’re willing to pay for a Peoria AZ house, if you’ll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth.

This is especially critical in today’s sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.

However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check. If there’s ever any confusion or discrepancy between the appraisal and the sale price, your trusted real estate professional will help you navigate any additional negotiations in the buying process.

A simple way to keep up with home prices is the market report.  You can create a market report custom to your home and neighborhood and be notified of any changes. 

Home Inspection

Here’s the key difference between an appraisal and an inspection. MSN explains:

“In simplest terms, a home appraisal determines the value of a home, while a home inspection determines the condition of a home.”

The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process – like the age of the roof, the state of the HVAC system, or just about anything else – you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your Arizona real estate agent is a key expert to help you through this part of the process.

The home inspection is one of the most important parts of the sale.  Buyers have found issues back from when the home was build, back from when homes were part of foreclosures, and also inspectors have found homes with major foundation issues that would not have been found without a home inspection.  Buyers need a professional to look over a home and crawl in the attic to thoroughly inspect your home and protect your investment.  

Bottom Line

The appraisal and the inspection are critical steps when buying a home, and you don’t need to manage them by yourself. Let’s connect today so you have the expert guidance you need to navigate through the entire homebuying process.

By kcm, photo from kcm