Home Inspection vs. Appraisal

Written By: Joan Ewing, Op-Ed Writer 

Hello Everybody – I feel the housing market is finally going to take a turn for the better. Although I have no crystal ball – I feel the questions, I have been fielding and the number of underwriting and processing jobs posted on CareerBuilder has soared. When the company I was working for approximately two years ago abruptly closed – I registered with CareerBuilder and I get available jobs everyday. Of course, they are not all in the area of the Country I am working – but since this blog is read nationwide – I feel this information would benefit everybody. So – heads up – the mortgage industry is picking up.

Soon we will be working with lots of buyers and fielding lots of questions – some will be answered by the loan officers and some will be answered by the processors. The topic this week will be answered mostly by loan officers; however, I feel it is important for everybody to be able to explain the difference between a Home Inspector and Appraiser.

The difference is sometimes very hard for the homebuyer to understand. The difference is the Home Inspector is responsible for the physical condition of the property. The appraiser is responsible for the Value and must be able to support the value with comparable houses within a 1 mile radius of the property. If the property is in a densely populated area – the comparables should be within a few blocks. Let’s talk about why the homebuyer should get a home inspection and make it a part of the purchase contract.

One thing to remember – Appraisals benefit lenders; home inspections benefit buyers.

A home inspector must be qualified and depending on the State in which you reside, they must be licensed. The home inspector is hired by the buyers – he has their interest at heart – he/she is working for them. Therefore it is important that the buyers choose their own home inspector. Perhaps the buyers have friends who recently purchased a property. If the buyers absolutely do not know anyone – they can look through the yellow pages and pick one or get a list of qualified home inspectors from their State’s licensed home inspectors. It is very important that the inspector be a person working for the home buyers, chosen by the home buyers.

OK – now what will the home inspector look at – the inspector takes an in-depth look at the home the borrowers are purchasing. He/she will evaluate the physical condition – the structure, construction and mechanical systems. Items needing attention either replaced or repaired will be pointed out and the inspector will also estimate the remaining useful life of the major systems (Heat, A/C, etc), structure and finishes.

Many buyers think that FHA guarantees the value or condition of the property they want to buy – FHA DOES NOT guarantee value or condition. If you find problems with your home after closing FHA will not give you money for repairs nor will they buy your house back. Which is the reason FHA emphasizes that it is the buyer’s responsibility to select a qualified inspector.

While it is the job of the buyers to get a qualified home inspector for their property; it is the job of the lender to get a qualified Appraisal to protect their interest in the property, should the unthinkable happen, such as a foreclosure.

The appraiser is also responsible for making sure the property meets FHA minimum property standards (Health, safety, soundness and structural integrity) and to make sure the property is marketable.

It is the appraiser’s responsibility to note visible problems with the property and with issues not to HUD’s standards. Some of these problems could be the same as noted by the home inspector.

Some other health testing to consider - Radon gas testing – which is a natural radioactive gas found in some homes. Lead testing is important if the property was built before 1978.

It is important that the borrower understand – if they spend the money prior to closing for inspections – it could save them thousands of dollars after closing.

In closing I would just like to say – no one wants to see the sale of a property fall through; however, do you want to see your buyers purchase a property that will not make them happy.

As usual – If you have any topics you would like to see covered in my blog – please let me know. Keep processing. More later.

About The Author

Joan Ewing - As an op-ed writer and active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. 


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.