It's easy to understand why inexperienced buyers use appraisal and inspection interchangeably when discussing a real estate purchase. Both ordeals involve a licensed professional visiting the property to judge its worth. The subsequent reports, however, serve two very different purposes.
How appraisals differ from inspections
Appraisers essentially walk through and note any major, obvious flaws that affect the market value. Inspectors, on the other hand, do more than a cursory glance. They spend several hours checking the property's current condition and assess potential risks for the prospective purchaser. Inspections even consider areas such as cosmetic damage and pest infestation.
Appraisers utilize two types of information when drafting their report -- personal observation and comparable sales in the specific township. Unlike home inspections, appraisals are conducted for the benefit of the lender. Lenders confirm that the asking price matches appraised value before approving the buyer's mortgage; they will not take the home inspection into account.
How appraisals are similar to inspections
Neither professional is paid off commission, so expect them to impartially check for:
- Address and property line verification
- Number of rooms
- Window in each bedroom
- Distinct visible damage
- Value add-ons (pools, patios, etc.)
- Square footage of home
- Heating/cooling systems
- Major problems home inspectors look for
Moisture in the basement is one of the biggest turn-offs for homebuyers, and home inspectors examine the basement closely for any leaks or dampness. What can cause these leaks? Poor drainage causes water to drain toward your house rather than away from it.
- Check your gutters (especially the downspouts) to make sure they're clean and in good working order
- If the problem is particularly bad, installation of a sump pump may be necessary
- A cracked foundation also allows water inside
TIP: While you can attempt to fill cracks in your foundation, you'll have to notify the buyer and lower your asking price accordingly.
Mold and mildew (especially toxic black mold) should be attended to immediately -- whether you are selling it or not.
- If you have less than 10 square feet of mold, get rid of it with soap and water
- Black mold requires a bleach and water mixture
- If you're dealing with a larger area, you'll need to find a professional to take care of the problem
TIP: Getting rid of the source of the mold is just as important as getting rid of the mold itself.
Roof damage is another major issue. If a home inspector finds shingles -- or the area under the shingles -- to be damaged or rotted, there's a high probability they will insist upon repairs or a decreased asking price.
TIP: Be honest about your damaged roof. This is hard, if not impossible, to hide.
Expect the home inspector to check your plumbing and water pressure. They will:
- Turn on faucets
- Flush toilets
- Check for leaks
Call a plumber to fix any problems or, if possible, take on the project yourself.
TIP: An inspector will check your septic system by flushing a colored dye down one of the toilets. If the dye surfaces in the septic drain field, it shows a drainage problem. You can call a septic specialist to perform this test for you and fix any problems that are found.
Get both an appraisal and an inspection
Any real estate agent will suggest a home inspection for buyer and seller alike. A seller hires an inspector before placing their home on the market to nip any huge issues in the bud; buyers rely on inspections before commitment to understand and limit legal liability. Appraisals are sometimes a legal and lender requirement to validate the home as sufficient collateral for the home amount.
Remember that you aren't obligated to fulfill every buyer wish. Your housing contract will outline which systems need to be in good working order at closing. If you make no repairs, the buyers cab back out of the housing contract without penalty.
The bottom line is that you shouldn't feel you have to comply with unreasonable demands. If the buyer asks for too much, find a new one.