Real Estate Inspections vs. Appraisals

You know, those closing costs can really add up.  And sometimes my clients ask me why they have to pay BOTH an appraiser AND an inspector.  The answer is, these two reports are designed for two different purposes.  One protects YOU and the other protects your lender.

Appraisals Protect Lenders

An appraisal is required by your lender and protects the mortgage companyby comparing your new home to similar homes in the neighborhood.  The US Dept of Housing and Urban Development (HUD/FHA) lists three purposes for an appraisal...

• To estimate the market value of a house
• To make sure that the house meets minimum property standards/requirements
• To make sure that the house is marketable

In other words, an appraisal re-assures the lender that your mortgage is a relatively safe investment.

Inspections Protect You

An inspection, on the other hand, is designed to protect you, the buyer, by taking an in-depth look at the condition of the property and identifying any maintenance issues that might crop up after move-in.  HUD  lists three purposes for an inspection...

• Evaluate the physical condition: structure, construction and mechanical systems
• Identify items that need to be repaired or replaced
• Estimate the remaining useful life of the major systems, equipment, structure, and finishes

An inspection gives the buyer the information needed to ask for problems to be fixed before the closing or to negotiate a repair allowance into the final sales price.

So yes, it is necessary to obtain both an appraisal and an inspection report.

Roger Martin