I Have a Home Inspection Report, Why Do I Need an Appraisal?

A lot of people think the home appraisal and a home inspection are the same. But that is not the case. The simplest way to remember the difference is to think:

Unlike the home inspection, the home appraisal is mandated by the lending institution. If you're paying cash for a house and there is no lending institution, or mortgage, then there is no need for an appraisal. The home appraisal will help the bank answer: is the house worth what my borrower(s) are paying? Are other similar houses in this area selling for the same amount? If the loan goes into default, can we sell the house for what we are owed?

Generally speaking the appraiser is more concerned value of the property well home inspectors are primarily concerned with the condition of the property. Real estate appraisals develop valuation of the market value of the property. At Fast Appraisals, a Cleveland Home Appraisal Company, our team prepares hours worth of research before the certified home appraiser sees the property. In the wake of the COVID-19 pandemic, we have even been able to do many of our appraisals without going into the home at all, offering a drive-by appraisal (an exterior inspection only) and a desktop appraisal as contactless home appraisal options. Read "Alternative Appraisals: Curbside Appraisals, Drive-By Appraisals, Desktop Appraisals, Hybrid…" for more details. Once the preliminary research is done and nearby comparable sales are identified, our licensed appraisers only spend about 30 minutes doing an inspection inside the home - primarily to confirm the on-line records, make sure the square footage is accurate on the assessors site, take measurements of the house, take photographs and take note if there are any safety issues that might be of concern.

Remember, home appraisers are hired by the lender, or the mortgage company, and not by the buyer. The appraiser's job is to prepare an accurate valuation, based on comparable sales in the area, so that the lender, or mortgage company knows what the collateral of the loan is worth. Similarly, if you were to lend a friend $15,000 and use a diamond bracelet as collateral, should your friend not pay you, a jewelry appraisal can be done to tell you if you could sell the diamond bracelet for the $15,000 you are prepared to lend.

Home inspectors do not do any research before arriving at the property and generally have no training or interest in what you're paying for a home. Unlike good home appraisers who are well-versed in the intricacies of unusual value fluctuations in the Cleveland property market, home inspectors care about one thing - the condition of the home. A home inspection typically takes between three and four hours and has a hand-on inspection. They look at everything involving the structure of the house such as walls, ceilings, roofs, attics, foundations, windows, drainage, plumbing. The home inspector prepares an inspection report to include the condition of all the components in the home including water pressure, temperature, function of appliances function of windows and doors, function of the water heater the furnace… The inspector gets into crawl spaces and attics, tests each electrical outlet, faucet, appliances, temperature of refrigerator, and more. A good home inspector will have a tool belt full of tools to diagnose temperature, moisture and electrical current while a home appraisers brings a camera, a notebook and some measurement tape, which even now can be done electronically. We take pictures and crunch the numbers in the office - sending the appraisal report to the lender to continue the underwriting process.

So if you’re buying a house, first you'll put an offer on the house you want to buy. Then, you'll have a brief window of time to get an inspection and use those results to rescind your offer or negotiate the purchase price if substantial deficiencies were uncovered during the inspection process.  The inspection is purely optional and not required by the lender. However, once you have determined you are buying the house and moving forward with the Purchase Agreement, the lender requires the appraisal. Hopefully, that answers the question we get asked all the time:

If you need an appraisal for a property valuation to a tax appeal, a divorce, an estate valuation, a private-party sale, or for any other purpose, contact the appraisal team at Fast Appraisals, a Cleveland Home Appraisal Company.