Appraisals V. Inspections: Why Buyers and Sellers Need Both

by Kevin Smith Author

One area that potential buyers and sellers often confuse is the differences between a home appraisal and a home inspection. While more accurate appraisals and better home inspections in Philadelphia, PA, are important buying, selling and financing tools, and often one does indicate the status of the other, they are quite different. Here is how.

Each Plays a Role

An easy way to remember the difference is that during a home inspection, an inspector will not estimate the value of a home. They will estimate the cost of fixing any issues or at least be able to identify if needed work is a minor or major project.

During an appraisal, the appraiser may use the inspection report (and any other public or seller-provided information) to assess the value of a home. That means an inspection report that calls for $10,000 in repairs may be reflected in the appraisal value.

The Inspection

An inspection is solely concerned with assessing the work that needs to be done to bring a home into code, unless the seller requests a more thorough review. In that case, the inspector may point out work that could be done, but is not immediately necessary, or work that would benefit the status of the house.

For example, the inspection report may indicate that repairs or replacement of the roof of a house are needed to meet building, health or safety code. It may set a deadline for the work to be completed and it may indicate that the pending sale cannot move forward until the work is done.

Also, if requested, the inspector may also suggest updating the wiring and light fixtures to be more energy efficient even if the wiring meets “grandfather clause exclusions” in regards to building code compliance.

Finally, if requested, an inspector may make suggestions on how to improve the value of the house such as adding lighting, updating plumbing, etc. These suggestions are usually not aesthetic but add value through infrastructure improvement.

The Appraisal

An appraisal generally will aid the lender in a home sale. It lets them know the value of the property and whether the amount the potential buyer wants to borrow is justified or excessive. It also can factor into an assessment of the reliability of a potential buyer, considering how much they are asking to borrow.

The appraisal establishes the “market value” of a home. It factors in location, condition of the house, square footage, recent area sales, similar property sales and community characteristics (education quality, parks, etc.) The final appraisal can help the buyer determine if the amount they are offering is reflective of the area the house is located.

Better home inspections in Philadelphia, PA, help everyone involved in the buying process. Better appraisals can help everyone, but mostly aid the lender and potential buyer.