Welcome to week one of "52 Common Questions About Real Estate!" This week's question- What is the difference between an inspection and an appraisal? 

You've been looking at homes, checking out kitchen layouts, imagining backyard furniture, maybe even putting in multiple offers, and now the day has come- your offer was accepted!!! Yay!!!!

Now what? 

One of the first things you'll do is schedule your INSPECTION. The inspection period is generally the first 10 business days after your offer was officially accepted, and in this time you can hire and do as many inspections as you want. The inspection is paid for by the buyer, and the report that comes belongs to the buyer. It doesn't belong to the seller and it doesn't belong to the bank. It is the buyer's! With that report you and your agent will decide what you would like to ask the seller to repair, if anything, and you'll begin those negotiations. 

SEPERATELY, when you get your offer accepted and your lender gets your contract, they will begin their back-end work. One of the things they will do is order the APPRAISAL. They put the information into their big system of appraisers, and wait for an appraiser to "claim" it, meaning they are agreeing to come out and complete the appraisal. The appraiser isn't looking for specific repairs or things that should be updated- they are there to determine the value of the home for the bank's purposes, to ensure that the loan isn't greater than the home is worth. They compile their report, and get it back to the lender with their assessment of the value. While they are not looking for specific repairs, they will call out things they consider health and safety hazards- for example, if there are exposed wires hanging out of an outlet in the home, or if the roof looks like it doesn't have very much life left, they might call out those things and the lender will want them repaired. The appraisal is also paid for by the buyer, but the report goes back to the lender, who will then share it with those who need to see it. If the value is below the agreed upon sales price, you'll likely need to re-negotiate that price. 

So that's INSPECTION vs APPRAISAL! Next week- What's the difference between an FHA and a Conventional Loan?