A common misconception among Buyers I work with and have worked with is whether an inspection or appraisal or both are required. The answer is yes and no.
Appraisals are completed by a Licensed Appraiser and are typically defined as: A real estate appraisal, a property valuation or land valuation is the process of developing an opinion of value for real property (usually market value). wikipedia
Real estate transactions often require appraisals as most homes are usually not sold very often and the fact that each property is unique in various ways, especially the homes location, which can be a key factor in considering the homes value. Appraisal reports are required by Lenders and form the basis for mortgage loans, settling estates, divorces, and taxation. In rare cases an appraisal report is used to establish a sale price for a property.
For Buyers: If you have a mortgage, your lender will require an appraisal. The appraisal gives the lender the confirmation that the property they are lending on is worth the amount they are lending. In rare cases when the property does not appraise for the agreed upon purchase price, the buyers may be able to re-negotiate the purchase price to reflect the appraised value.
For Sellers: Talk to your friendly local Real Estate professional before ordering and paying for an appraisal. They can give you an educated idea of what you could realistically list and expect your home to sell for in the current condition and market. The problem with having your home appraised without a purchase agreement is good ole fashion market value. Market Value is simply defined as the price someone is willing to buy that home for and what someone is willing to sell it for. As a Buyer broker, I run into homes that seem overpriced based on what I see in our market on a daily basis, homes that the sellers are somewhat hard to negotiate with as they have the number stuck in their head from an appraisal they had six months, two years, or even ten years ago. Your broker will be able to provide you with a market analysis that can help you decide if now is the right time to sell. For an example, within the eleven and a half years we owned our first home, we saw the value rise to $155,000 from the $148,500 we purchased it at and fall to $138,000 before we sold this past November.
What about Home Inspections?
So you made an offer, it was accepted, and now you have to decide if you will have a home inspection. In some cases and to secure certain types of financing your lender will require very specific inspections before they will loan on the property, and in other cases they are required by law. Very typically in our neck of the woods sellers will be asked to pay for a foundation inspection on manufactured homes, as well as a septic inspection and possibly a termite and or pest inspection. A general home inspection is a great way for a licensed professional to give you a snapshot of the innerworkings as well as overall condition of the property. Your broker will most likely have a short list of inspectors that they have worked with in the past that they can recommend to you. The job of the inspector is to provide you with information that can help you make educated choices to protect your investment and find any issues with the home, including but not limited to: the roof, plumbing, electrical components, appliances, heating & air conditioning systems, ventilation, windows, the fireplace & chimney, the foundation and so much more!
The Take Away:
They say 'ignorance is bliss,' but not when investing your hard-earned money in a home of your own. Work with a professional you can trust to give you the most information possible about your new home so that you can make the most educated decision about your purchase.