What is the difference between a Real Estate Appraisal and a Home Inspection?

What is a real estate appraisal and how is it different from a home inspection? As a licensed real estate appraiser in South Florida I get that question a lot! And no, I don’t need to go on your roof – that’s a home inspector! So here goes...let me explain the difference.

A home inspection is concerned about verifying the “condition” of a property whereas real estate appraisers are much more concerned and focused on determining the “value” of the property. A home inspector checks all the electrical outlets, the plumbing, the appliances, and yes..they climb on the roof and into the attic. They are looking for potential problems like structural cracks, leaks, and mechanical/plumbing system repairs and take notes on their condition and life expectancy If there is something wrong, they note it on their inspection report.

A home inspection is usually optional, however, it is ALWAYS a good idea to pay for one if you are buying a new home, condo, etc. The cost of a home inspection is minimal compared to the potential problems you could avoid by having a professional home inspection completed.

A real estate appraisal, however, is never optional (for the most part) if you are buying a home and are getting a mortgage Your bank or mortgage company will almost assuredly always require an appraisal to be completed. Why? Because they don't want to loan you $250,000 for a home that's only worth $200,000! Makes sense right? And it's not like they are going to take your word for it!

That's where a state licensed or certified real estate appraiser comes in. We don't care what the house is worth! We do actually but not in the same way you do. We are totally indifferent to the fact that you raised your kids in that house and that it's “special”. Just because you KNOW your house is the best house in the neighborhood doesn't mean that everyone else agrees with you. As appraisers we have to look at everything as a disinterested third party...similar to as how a new buyer would be looking at it if it were for sale. YOU may love that pink and green wall in the living room but the majority of buyers will not. You see that wall as a positive feature whereas many buyers will see it as they will have to spend $500 to paint over it!

So back to the story. So the bank doesn’t trust your opinion of the value of the house you are trying to refinance or purchase so they will call in someone who can look at the property and figure out what its worth objectively. They are, in fact, about to loan you $200,000 so it only makes sense right? That’s why they call us – a state certified real estate appraiser. They know we don’t have any feeling toward your house. We will determine its value based solely on the facts with no emotional ties.

A real estate appraiser spends much less time at your property and has to assume that everything is working properly – unless we see evidence on our walk through. Your dishwasher could be broken but we would have no idea (unless you are getting an FHA loan but that’s a different story). We assume it works. A home inspector, however, will always check it.

A real estate appraiser takes the information and photographs they gathered at your property and goes back to their office to begin figuring out its market value – what it's worth.

Are there some similarities between a home inspector and a real estate appraiser? Kind of. I guess so. A home inspector pays NO attention to the value of the property they are inspecting (Other than the fee they are going to charge! Sorry, Home Inspection joke!). They don’t care what it's worth. They are only looking for deficiencies in condition, wear and tear, etc. A real estate appraiser, on the other hand, does pay attention to the condition of the home – but just not as extensively as a home inspector. If we see there is a roof leak we will certainly comment on it and explain to the bank that the roof appears to be leaking and then value the property accordingly. But if we don’t see the problem from a reasonable expectation (like something hidden behind the wall) we cant be expected to address it.

I hope that helps clarify the difference between a real estate appraiser and a home inspection. If you have any suggestions for future blog topics or would like to discuss ordering an residential real estate appraisal in South Florida, please don't hesitate to call us at 561-853-2129 or check us out at www.landmarkres.com.