Appraisals versus Home Inspections

appraisals versure home inspections writting on chalkboard

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Appraisals vs Home Inspections: What’s the difference?

appraisals

People often confuse appraisals versus home inspections, which is understandable. We both look at homes, must be independent, and provide unbiased information. Yet each job has quite different purposes and outcomes in the home buying process. Today, I am going to explain some of the differences between the two.

Purpose:

Home inspections: It is to educate the buyer about their new home so they can make an informed decision on the purchase. A home inspector looks at more parts of the house and is more concerned with the condition and function of all of the systems of the house.

Appraisals: It is to protect the mortgage lender’s assets, thus an appraiser needs to determine the value of a home and make sure that a home is actually worth the amount of money it is being purchased for.

*Note: A home’s value will be dependent upon outside factors. These include what other properties in the area are worth. As well as a comparison of the home’s condition to other homes in the neighbourhood. The appraisal industry defines this as “comps.”

Who is the client?

A home inspector’s client: The buyer – the inspector only has the client’s best interests in mind. The client is fully responsible for hiring of the inspector.

An appraiser’s client: The mortgage lender/bank, the bank typically hires the appraiser. An appraiser is not beholden to the buyer’s best interests in any way.

What happens at the subject property?

Home inspectors: Most home inspectors spend several hours on site to complete the inspection. I complete a “hands-on, walk-on, crawl-under” visual inspection of the home. Inspectors will have the client onsite for the whole inspection, or at the end of the inspection. Home inspectors involve the client in the process.

Appraisals: Some appraisers spend less than an hour onsite, as the majority of their work is based on detailed research of the “comps” within the area. The buyer doesn’t attend an appraisal, nor do they know when it will happen. Often they don’t even see the appraisal because the bank is the client; not the buyer.

In conclusion, there are significant differences in the appraisals vs home inspections conversation. Home inspectors determine the condition actual of the home, whereas appraisers develop an opinion of overall value of a home.

Author: Geoff Bohaker at Shelter West Home Inspections


About Geoff Bohaker

Geoff is the owner and operator of Shelter West Home Inspections in Vancouver, B.C., Canada. His boundless curiosity for buildings and how they interact as complete systems, guide him on his journey to educate his clients on making the most informed home decisions possible.