A home appraisal costs around $357, on average, and prices can range from $250 up to $500. The cost of a home inspection averages around $340 and can range from $190 up to $510. The cost of these reports is similar in most cases, but keep in mind that you may need to pay for both when purchasing a home.
Appraisal vs. Inspection: Requirement Differences
Appraisals and home inspections aren’t always technically required. While they’re often both worthwhile, even if they aren’t mandatory, the cases where you can skip each differ.
When Is a Home Appraisal Required?
A home appraisal is required in any real estate transaction that involves a mortgage. The primary purpose of a home appraisal is for the lender to confirm the loan-to-value ratio and confirm that the collateral they’re using for the mortgage is worth within a certain percentage of the loan amount.
If you’re purchasing a home in cash, an appraisal isn’t required, but it’s still a good idea to confirm that you’re not overpaying for the property.
When Is a Home Inspection Required?
A home inspection is technically never required. Lenders will get all of the information they need from the appraisal report, so a home inspection only serves to benefit the buyer. In fact, some real estate agreements include a clause that states the buyer will waive their right to a home inspection, often in a highly competitive market, to secure a deal.
Keep in mind, though, that home inspections are always worth it, even though they aren’t required. They can identify major problems that could lead to significant repair costs for you down the road.
Appraisal vs. Inspection: Hiring Differences
Appraisals and home inspections demand different professionals with different qualifications and training.
You’ll need to hire a certified home appraiser to conduct a home appraisal. In most states, there are specific training and certification programs an appraiser must go through.
It’s worth noting that the buyer often pays for an appraiser, but the lender is the party that chooses an appraiser they trust.
You’ll need to hire a home inspector to conduct a home inspection. Most states require that an inspector meet specific education requirements and pass the National Home Inspector Examination.
The buyer often hires and pays for a home inspection, although the seller may offer to pay to facilitate the deal.
Appraisal vs. Inspection: What the Results Mean
The results of the two reports mean different things for the buyer and seller in a real estate transaction.
What Do the Results of a Home Appraisal Mean?
The results of a home appraisal or land appraisal can kill a deal if the value comes in too low for the lender to remain within acceptable loan-to-value ratios. Appraisals can also lead both buyers and sellers to renegotiate the sale price, even if they don’t interfere with the mortgage process. The only exception would be if the offer agreement documents include language that prevents renegotiation based on the appraised value.
A pre-list appraisal could direct a seller toward renovations that would maximize home value.
What Do the Results of a Home Inspection Mean?
A home inspection report will tell a buyer exactly what they’re buying, as well as give them an idea of any repairs and repair costs they might face after closing.
In most cases, buyers will be the ones to renegotiate based on inspection results, asking for credits to carry out repairs post-closing, requesting a reduced sale price, or asking the seller to carry out the repairs before moving forward with the sale. The only exception would be if the buyer waives their right to a home inspection, which prevents renegotiating based on the results.
A pre-list home inspection could direct a seller toward necessary repairs before selling.
Michael Marshall - Buyer's Resource Realty Svcs.
