Appraisal Vs. Home Inspection: What's the Difference
Appraisal Vs. Home Inspection: What's the Difference
I am often asked about inspections and appraisals, and if they are required in a transaction, the answer is “it depends”. An inspection is done by the buyer in a transaction, and it is their choice whether they would like to include an inspection/due diligence contingency. It is not required that a buyer do an inspection. There are pros and cons to be considered depending on the situation, and it’s something to discuss further with your realtor.
If you're buying a home in Maine, in areas like Portland, Cape Elizabeth, or Falmouth, it's important to understand how the home inspection process fits into your overall purchase plan. Some buyers choose to waive inspections in competitive markets to make their offers more attractive, but that decision carries risk and should be carefully considered. A thorough home inspection can give you peace of mind and uncover potential issues that may not be visible during a showing, from roofing problems to outdated plumbing or electrical systems.
An appraisal is conducted by the bank to assess if the property value aligns with what the buyer has offered. There are times when a borrower could get an appraisal waiver, and this isn’t required by the bank. Ask your lender more about appraisal waivers and when those may be a possibility in a transaction.
Appraisals are especially crucial in a fast-moving market like we often see across Southern Maine. When home values fluctuate quickly, your lender wants to make sure the purchase price matches the market value. This is to protect both the bank’s investment and your own. If a property does not appraise at the agreed-upon price, the buyer and seller may need to renegotiate, or the buyer may need to bring additional cash to the table. Your real estate agent can help guide you through that process and explain the best steps to take depending on your financing type and the appraisal results.
Government-backed loans, such as FHA, VA, and RDA, have a more stringent appraisal inspection process that they require. These inspections require that the appraiser also look for any health and safety items that are not allowed to be in the home in order for the loan to be approved. Some of these items include things such as peeling and flaking paint, handrails on basement stairways, spindles that are the correct distance so that kids can’t slip through them, and broken windows. If these items are found to be evident in the home, then it may be required that the items be repaired for the loan to clear and the sale to go through.
For sellers, it’s helpful to understand what appraisers are looking for, particularly when government loans are involved. Making small repairs ahead of time can prevent delays and help your transaction move smoothly. If your home has older features or cosmetic flaws, talk to your agent about whether any improvements are worth addressing prior to listing.
Whether you're buying your first home in Maine or preparing to sell your current one, having clarity on the difference between inspections and appraisals is key. Every transaction is unique, and both tools serve different but important purposes in the home buying and selling process.
Feel free to reach out for more information on this change. I am here to help every step of the way!
