In our previous post, we talked about home inspections and why getting one is a good idea. Similar to inspections, getting an appraisal is a good idea, but unlike inspections, appraisals are required by lenders in an effort to protect their investment. There are many more similarities and differences between appraisals and inspections, and we’re going to discuss appraisals in further detail to give you a better understanding of this important step in the homebuying process.
What is a home appraisal? – An appraisal is a report conducted by a licensed professional that says how much a home is worth. It takes into account things like the condition of the home’s interior (walls, windows, doors, floors, etc.), exterior (roof, chimney, siding), location and value of nearby homes, and home features (square footage, number of rooms, etc.). An appraisal happens when you apply for a mortgage, and benefits both you and the lender. The lender is able to compare the amount of the loan you requested to the value of the home found by the appraiser to decide if it’s a good idea to approve the loan.
What is the difference between an appraisal and inspection? – The biggest difference between an appraisal and inspection is that while an appraisal benefits both the buyer and lender, an inspection only benefits the buyer. An appraisal is specifically used to determine the value of the home based on an array of factors, whereas an inspection is used to find out the condition of the home.
What are the benefits of an appraisal? – There are a handful of benefits to getting a home appraisal. As touched on previously, an appraisal benefits both the lender and buyer by ensuring that both parties are making a sound financial decision. It protects lenders from financing an over or unfairly priced home, and it can ensure the buyer isn’t paying too much for the home as well. An appraisal can also help the buyer find potential issues with the home, much like an inspection, and in doing so, can make the negotiation of the home a lot easier.