Home inspections and real estate appraisals are commonly confused. They offer some similar attributes but at their core, they are valuable for different reasons. The main similarity between the two is that an inspection and an appraisal both are unbiased evaluations for a property.
Appraisals ensure that the owner and buyer are aware of the appropriate value for the property. The appraiser checks the condition of the property and any major systems that the property has. Additionally, the appraiser also compares the value of the property to those in the area under similar conditions. An appraiser cannot speak to the necessary repairs that a home needs, which is a large difference between an appraiser and inspector.
It’s important to note that a commercial appraisal is similar, but not the same as residential appraisals. A commercial property serves a business purpose as opposed to a property for people to live on. A commercial appraisal is a much more lengthy process than a residential appraisal. The reason that a commercial appraisal is more detail-oriented is because there is often more to consider in terms of size, technicalities, what property would be used for, and more.
Some important appraisal factors:
- Zoning classification
- Industry type
- Property type
- Lot size
- Parking capacity
- Year building was built
Farm appraisals also have unique factors and characteristics that wouldn’t apply to a different property type. A farm is a specialized industry that has a different structure than most. When an appraiser is doing an evaluation for a farm, they take into account the value of the land, soil type, irrigated vs non-irrigated, machinery and more. These factors differ greatly from the other type of appraisals.
A home inspection is a process that takes place when a buyer is hoping to purchase property but wants to know the full condition of the house first. An inspection takes place before the purchase of property in case the owner is concealing information about the property. After a home inspection, the buyer would better know what work and improvements need to be made to the property. A home inspector cannot speak to the property value.
Some important inspection factors:
- Any damage to the house
- Insulation condition
- Roof condition
- Heating/cooling system
- Structural components
- Any repairs or improvements needed
Condo Document Review
A condo document review differs from appraisals and home inspections. A condo document review is the analysis of important information from a Condominium or Strata. A third-party reviews this information so that the potential buyer can have a better understanding of what they are purchasing and whether or not the Condominium or Strata is a good fit. A condo review doesn’t involve determining the monetary value or what needs to be repaired, it instead provides potential buyers with a synopsis for the property and unit.
The main and largest difference between real estate appraisal and home inspection is that a home inspection looks at the condition of the property, while an appraisal estimates the value of a property. Additionally, a buyer often requests a home inspection, while an appraisal is mandatory for the buyer’s lender.
Remembering the differences between a home inspection and real estate appraisal will offer you a more well-rounded perspective on the necessary and recommended steps when purchasing a property.