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Whether you’re thinking about selling your home or buying a home, it’s important that you understand the difference between a bank appraisal and a home inspection. In fact, one of the most common real estate misconceptions is that a bank appraisal and a home inspection are one in the same.
There are many reasons why a bank appraisal and a home inspection are different. Buyers and sellers who believe they are the same or similar end up being surprised when they are informed they are not.
Read on to find out what the differences are between a bank appraisal and a home inspection. In addition you will find out what a bank appraisal is, what a home inspection is, and also some of the inspections that a buyer has the option to perform during a real estate transaction.
An appraisal is an unbiased, professional opinion of a homes value that is completed by an appraiser. Appraisals are performed in real estate transactions when a buyer is taking advantage of financing through a financial institution and also sometimes when a homeowner is attempting to refinance their mortgage.
The primary purpose of a bank appraisal is to ensure that the sale price that a buyer and seller agree upon is not more than the current market value of the home. A bank appraiser ensures the contract price is appropriate given a homes condition, features, and location. In the event a buyer defaults on their mortgage the bank completes the appraisal to ensure they can recoup the money they lent to the borrower.
Whether buying or selling a home, it’s important to understand that there are some common bank appraisal issues that can arise. Being aware of a common appraisal issue such as a home appraising for less than the agreed upon sale price can help alleviate additional frustration, should an issue arise.
The term, “home inspection,” is very vague. When a buyer is purchasing a home they have the right to complete a variety of different types of inspections and there are many reasons to have an inspection when buying a home.
The most common inspection that is performed by a buyer is the general inspection of the home by a licensed home inspector, general contractor, or other buyer representative. A general inspection of a home is a detailed investigation into a homes plumbing, electric, HVAC systems, roof, and other aspects of the home.
While a general inspection is the most common, it is not the only inspection contingency that a buyer has the option to include in their offer. Below are 5 other common real estate inspection contingencies that a buyer could perform when buying a home.
Now that you have a strong understanding about what an appraisal and a home inspection are, it’s important to understand the differences. The differences between an appraisal and a home inspection are not commonly discussed. Below are some of the major differences between a bank appraisal and a home inspection.
One of the biggest differences between an appraisal and a home inspection is when they are actually completed. When a buyer and seller agree to terms of a real estate contract, a buyer has a specified number of days from acceptance to complete the various inspections they make an offer contingent on. The amount of days will vary, depending on the number of inspections.
Once a buyer is satisfied with the inspection results, a bank appraisal will be ordered and completed. It doesn’t make any sense for a buyer to pay for the appraisal before they are satisfied with the results from their inspections, otherwise they could be spending money for nothing. There are many reasons why a real estate deal falls through and inspection results is one of the most common.
Another difference between an appraisal and a home inspection is the length of time it takes for each task to be completed. A home inspection, depending on the inspector, can last anywhere between 2-4 hours to complete depending on the size of the home. Since a home inspector is rarely the professional responsible for completing all of the inspections, such as a chimney inspection, it’s possible that the home inspection phase can take several days to complete because it may not be feasible to coordinate all inspections at once.
A bank appraisal on the other hand typically will last between 30-60 minutes, depending on the size of a home. The bank appraiser will take measurements of the home, takes photos, and makes notes about improvements to the home. The bank appraiser is also looking for visible safety concerns in the home, such as missing handrails and peeling paint, but will not be as detailed as an inspection of the home.
A difference between a banks appraisal and a home inspection is the negotiation phase, or lack there of. After a home inspection is completed, if a buyer is not satisfied with the results, they have the opportunity to request repairs or further negotiations on the price of the home. One of the most critical skills for a real estate professional to possess, both the buyers and sellers agent, is knowing how to negotiate issues after a home inspection.
When a bank appraisal is completed, if there is an issue with the homes value or repairs that are noted in the appraisal report, there is no negotiation phase. For example, recently while selling a home in Rochester NY, the bank appraiser required that the sellers scrape and paint the garage. Before the bank would approve the funding for the buyers mortgage the appraiser had to revisit the home to ensure the scraping and painting of the garage was completed. There is no negotiating if an appraiser under appraises a home or cites repairs, end of story.
As you can see from the above information, there is a major difference between an appraisal and a home inspection. It’s critical whether you’re buying or selling a home that you understand the differences so that there are no surprises.
The major takeaway is that an appraisal is completed to protect the lenders interest and home inspections are completed to ensure the buyer understands the ins and the outs about the home they are looking to purchase.
Are you buying a home in Rochester NY or thinking about selling your home? If so, it’s important to understand the difference between an appraisal and a home inspection. If you’re still in the beginning of buying or selling and are in need of a top Rochester NY real estate agent, contact me and I’d love to explain how I make the buying and selling process easy.
About the authors: The above article “What’s The Difference Between An Appraisal And A Home Inspection?” was provided by the Keith Hiscock Sold Team (Keith & Kyle Hiscock). With over 30 years combined experience, if you’re thinking of selling or buying, we’d love to share our knowledge and expertise.
We service the following Greater Rochester NY areas: Irondequoit, Webster, Penfield, Pittsford, Fairport, Brighton, Greece, Gates, Hilton, Brockport, Mendon, Henrietta, Perinton, Churchville, Scottsville, East Rochester, Rush, Honeoye Falls, Chili, and Victor NY.
© 2016, Kyle Hiscock. All rights reserved.
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