Whether you’re buying a rental property or your forever home, it’s important to determine whether the property is worth what the homeowners are asking. Home buyers can ensure that they’re getting their money’s worth at two points in the buying process: the inspection and the appraisal. While they sound like they could be interchangeable, both provide different types of information. Here’s how they differ.
Inspections
The inspection occurs after a seller has accepted your offer but before the purchase is complete. They typically cost between $300 and $450, depending on your region and the size of the property. While appraisals are mainly about assessing what’s plainly visible, an inspector will check under the hood to see what’s really going on. A good inspector will focus on the following areas in particular because they’re usually the trouble spots where big ticket repairs (or dealbreakers) like to hide. The inspector will:
- Evaluate the property’s foundation and if it will create any issues.
- Ensure that the home’s structural integrity is solid.
- Examine the entire exterior, making sure that you get a good look at the property exterior as well as the yard and landscaping.
- Walk through the house and open every closet, cabinet, and drawer.
- Take a look at the property’s plumbing and HVAC unit, as problems with either could result in thousands of dollars’ worth of repairs.
- Determine the age and quality of your property’s electrical system.
This isn’t everything, but these are the major components. Generally, inspections take a few hours, but the inspector’s report usually takes three to four days to deliver, so keep that in mind if you’re on a tight schedule. If the inspector finds that substantial repairs are needed, the buyer can decide whether to renegotiate the price, request that the seller makes the specified repairs, or walk away.
Appraisals
The appraisal is meant to determine that the agreed upon price of the property is in line with the area’s market value. Even though the information in an appraisal is important for the buyer, it’s really a way for the lender to verify that the property is worth what you’re borrowing. An appraisal usually costs between $300 to 400, which the borrower pays for. A good appraisal will typically include:
- The square footage and an explanation of how it was calculated.
- A sketch of the building’s layout.
- Photographs of the home’s front, back, and the street in front of the property.
- Other relevant data, such as public land records or public tax records—that the appraiser uses to assess the property’s value.
- A street map that shows the appraised property as well as any comparable sales.
- Exterior photos of nearby comparable properties, or “comps.” Comps are homes of a similar size in the same neighborhood that have similar features.
Both steps offer important pieces of information, but I would strongly encourage you to get the inspection first. You could decide after the inspection that your dream home is actually a money pit, and the appraisal would be just a waste of time and money.
