Here's the difference. An appraisal looks at "market value" for the lender and the buyer. The purpose of the appraisal from the standpoint of the lender is to prove that the house is marketable (price wise) in the event that the buyer defaults on the loan and the bank becomes the new owner. The appraisal considers many factors: age and condition of the property; amenities and square footage; any improvements the property has had; and lot size and location, among other things.

A home inspection, on the other hand, has nothing whatsoever to do with the value of the property. Its' focus is on the physical condition of the property and its' numerous components - roof, electrical, plumbing, foundation, etc.

A lender will determine whether or not an appraisal of the property is required for the specific purchaser. Sometimes, although rarely, when the down payment is very large, a lender will not pursue an appraisal of the property. When there is no lender (cash transaction), a buyer is free to request that an appraisal contingency be added to the contract. In other words, although there is no mortgage, an appraisal contingency allows for the buyer to receive this "second opinion" (at the buyer's expense) and permits the buyer to void the contract if the appraised value is not equal to or more than the purchase price.

Although a home inspection should always be recommended to every buyer, in every transaction, it is ultimately the buyer's choice whether or not to pursue it.

By the way, both appraisals and home inspections can be done PRIOR to listing your home. An appraisal gives the seller another opinion of the property's value, and a home inspection will advise you if there are conditions that you can repair prior to marketing your home. Marketing a nicely maintained home can be more profitable to you, and will hopefully prevent any surprises when the buyer's inspector inspects the property.

©2002 Marge Harris. Publication or use of this article on or off-line without written permission from Marge Harris is prohibited. If you would like to use Marge's articles on your Web site or in your publication, just email Marge for details!

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