When applying for a mortgage loan, borrowers typically face both a home appraisal and a home inspection completed on the property they wish to purchase. While both processes are important, they serve different purposes and have different outcomes.
A home appraisal is an assessment of the value of a property, typically conducted by a licensed appraiser. The appraiser will visit the property and take into account factors such as the location, condition, and size of the property, as well as recent sales data of similar properties in the area, to determine an estimated value of the property. This value is then used by the lender to determine how much money they are willing to lend to the borrower. The lender wants to ensure that the property is worth at least as much as the loan amount, and an appraisal helps them to do this.
On the other hand, a home inspection is a thorough examination of the property's condition, typically conducted by a licensed home inspector. The inspector will visit the property and check for any structural, electrical, plumbing, and other issues with the property. The inspector will also check for any safety hazards, such as carbon monoxide leaks or mold. This process helps the borrower to identify any potential issues with the property before they purchase it, so they can make an informed decision about whether or not to proceed with the purchase. Additionally, the home inspector can also provide an estimate of how much it would cost to repair any identified issues.
It's important to note that a home appraisal and a home inspection are two separate processes and should be conducted by different professionals, even though a home inspector may have some knowledge about the value of the property. The appraiser is only determining the value of the property, while the inspector is determining the condition of the property and safety hazards.
In summary, a home appraisal is an assessment of the value of a property, while a home inspection is an examination of the property's condition and safety hazards. A home appraisal is typically required by the lender to ensure that the property is worth at least as much as the loan amount, while a home inspection is typically required by the borrower to ensure that they are aware of any potential issues with the property before they purchase it. Both processes are important and should be conducted by separate professionals.