Even though both a home inspection and a home appraisal involve a certified professional visiting a house and evaluating the property, they are done for different reasons and at different times during the homeownership process. The biggest difference between a home inspection and a home appraisal is that a home inspection evaluates the condition of a home and a home appraisal evaluates the value of a home.
Both home appraisals and home inspections are meant to ensure a house is sold at a fair price and to give buyers an idea of the property’s physical condition. However, there are few more important distinctions between an appraisal vs. inspection that buyers and sellers should know.
A home appraisal evaluates the current market value of the property and considers factors such as property condition, location, and amenities. Appraisals are done by unbiased professionals hired by the buyers or their mortgage lender.
What is included in a home appraisal?
Home appraisers look at various factors that could affect the home’s value. Some of these include:
- Recent sales of similar homes in the area
- Interior and exterior condition of the home
- Number of bedrooms and bathrooms
- Square footage of the property
- Improvements that could affect value (e.g. new flooring, roofing, appliances)
After a walkthrough of the property, home appraisers create an appraisal report with the estimate of the home’s market value. Many home appraisers use the Uniform Residential Appraisal Report from Fannie Mae for single family homes.
How long does an appraisal take?
The entire appraisal process typically takes a week or two to complete. When an appraisal is for a home buyer, it’s usually scheduled within a handful of days after the home offer is accepted by the current owner.
The home appraiser may spend a few hours walking through the property. When the inspector has completed the written report, the buyers and their lender will receive an appraisal report to review.
Who pays for a home appraisal?
Prospective buyers usually pay for the appraisal through the closing costs. However, some sellers pay for an appraisal prior to listing their home, and some homeowners pay for an appraisal if they want to refinance their mortgage.
What if the appraisal comes in under the sale price?
If the appraisal comes in under the home’s sale price, a lender may not grant the potential home buyers a mortgage at the purchase price. Buyers will either have to pay the difference out of pocket, try to negotiate a lower price more aligned with the appraised value, or let the sale fall through if they have an appraisal contingency.
Does a home appraisal impact property taxes?
Although home appraisers put a value on a property, the appraisal does not affect property taxes. Property taxes are determined by a government assessor who determines the value of the property based on previous years’ data combined with the local government’s tax assessment rate to come up with a total amount.