When buying a home, two key steps in the process often get confused: the home inspection and the home appraisal. While they might sound similar, they serve very different purposes and are handled by different professionals. Understanding the difference can help you make smarter decisions and avoid surprises down the road.
What’s a Home Inspection?
A home inspection is all about the condition of the property. The seller typically provides a home inspection report for potential buyers to review as part of their disclosures. After your offer is accepted, you can also opt to hire a licensed home inspector of your choosing to thoroughly check the home’s structure and systems, such as the roof, plumbing, electrical, HVAC, foundation and more. The goal is to help uncover any potential issues before you finalize the deal, and/or to understand the potential repair costs you would be taking on if you purchase the home.
Inspections usually take a few hours and result in a detailed report that highlights any concerns, from minor maintenance issues to major repairs. While not always required by lenders, inspections are highly recommended as they can save you from buying a home with hidden problems.
Depending on your location and the size of the home, you can expect to pay anywhere from $400-$700 for a home inspection in the Bay Area, but the price can vary. Home inspections for older properties can sometimes cost more than newer ones because they tend to require a more thorough inspection that takes more time. Larger homes also tend to cost more because the inspector has to cover more ground during the inspection process.
What’s an Appraisal?
An appraisal is all about the value of your home. It’s typically ordered by your mortgage lender to make sure the home is worth what you’ve agreed to pay. A licensed appraiser will visit the home, do a thorough walk-through and compare it to similar recently sold homes in the area to determine the fair market value of the property.
The estimated market value the appraiser provides plays a big role in how much your lender is willing to finance. If the appraisal comes in lower than your offer, you may need to renegotiate with the seller or come up with the appraisal gap out of your own pocket. Appraisals usually cost somewhere between $500-$800, though the price can vary based on factors such as property size, location and condition.
Why You Need Both
Even though inspections and appraisals serve different purposes, both are important for protecting your investment. An inspection helps you understand what you’re really buying, while an appraisal ensures you’re not overpaying.
If you’re buying with cash, neither step is required, but both are still worth considering. An inspection can uncover problems that could cost you thousands later, and an appraisal helps you feel confident that you’re paying a fair price.
Together, inspections and appraisals can help you make an informed financial decision when buying a home.
