What's the Difference Between Home Inspection and Appraisal?

What's the Difference Between Home Inspection and Appraisal?

Full Video Transcript Below

What's the Difference Inspection Report and Appraisal?

[00:00:00] Well, hey, real estate fans, Alice Lema here, broker John L Scott with another edition of the Weekly podcast. Today we're gonna talk about the difference between inspection reports and appraisal reports, because even though you've got expert eyeballs on the same address, they're two different animals. So let's address the inspection report first.

The inspection report is a deep dive into the condition of the house. You're gonna pay an expert to come in and flush all the toilets. They're gonna check the roof, the heating, the cooling if there is a a cooling system. They're gonna open all the windows. They're gonna turn on all the burners of the stove. They're gonna run the dishwasher. They do everything. And at least in our area, we get like a 20 to 30 page report in color, photographs, annotated arrows, stuff like that. And again, in our area, we don't normally send that to the lender. That's for the buyer and seller. And it's frequently practiced to do some kind of repair negotiation at that time, especially if it's health and safety.

And that would be electrical, plumbing, [00:01:00] roof, H V A C. Foundation, you know, something big. We don't normally negotiate little stuff cuz we want the big stuff. And in a super hyper accelerated sellers market, a lot of times we don't get to negotiate anything at all. So the inspection report is for the buyer, and sellers use the appraisal report.

And a lot of people don't know this. It's actually for the lender to be protected in case of a foreclosure. And so here's, here's what they do is they have the buyer pay for an expert to come out. They have a different list of things they're looking at than the home inspector, but they're just looking at the big things.

And if there's something wrong with the big things, then they write that down and they call it out as a lender required repair. And the loan will not close until somebody fixes that stuff. They're also checking the value. And that's normally what people think of [00:02:00] as an appraisal report. They're thinking somebody's coming out expert eyes, to make sure I'm not overpaying, but they're also checking the condition.

And guess what, if you have different kinds of loan programs and you have different kinds of condition lists, so the appraiser is looking at your house through the eyes of the lender according to the kind of loan you're getting, and not everybody knows that. So the easiest loan to, or I won't say easiest, I'll say the most forgiving loan is a conventional loan.

The buyer usually has a higher credit score and they usually have a bigger down payment. It's 5%, 10%, 20%, something like that. The more I would say more picky appraisals are gonna happen with a government subsidized loan. That would be your VA, your U S D A, your FHA. So the list is a little more strict with those kind [00:03:00] of loan programs, but either way, you're gonna have expertize in at least two times coming through the property to make sure you know, it is as good as you thought when you wrote your offer.

And if you're selling, you can definitely help things by getting a home inspection up front and doing the big repairs and then showing that to the buyer before they write their offer. Getting an appraisal ahead of time doesn't seem to help. We've, we've tried that out, off and on over the years and because it's really just one moment in time, so we don't really advise, at least in our area that people get an appraisal ahead of time. But you know what, if, if you have a lender that does call out certain repairs, chipped paint broken windows, something like that, nothing's gonna happen until that stuff is fixed. Traditionally, the seller does it, it's a lender required repair.

The buyer wrote their offer in good faith. So, but again, if it's a hyper [00:04:00] accelerate accelerated market, or there were multiple offers, Then if your lender calls something out and the sellers dragging their feet, sometimes it helps if the buyer either chips in at that point for some of the repairs or you know, get some done entirely.

So those are the differences between inspection reports and appraisal reports. Hope that helps. Gimme a call, gimme a text this weekend. If you wanna talk about what to do with the next step of your real estate life. My number is 541-301-7980. Also like can subscribe the channel. It really is helpful to pass it on to your friends and family.

We'd love that. In the meantime, have a beautiful weekend and hug those you love. See you next week. Bye now.

Post a Comment