appraisal vs. inspection????

Question

If I get an appraisal, do I necessarily need and inspection?  and vise versa???

Mark H. Porter · Answer

They really have nothing to do with each other.  The bank wants the appraisal and you should want the inspection

Jason Hirko · Answer

I think the investor can get a lot of good information from their appraisal as well. It never ceases to amaze me how many people never look at theirs or just look at the value and push it to the side.

Lien Vuong · Answer

Appraisal: Valuation of property against other in the area

Inspection: Health report card of the home and it's performance and overall condition

Bridgette Delva · Answer

Hi Clay, in addition to the comments from our fellow BPers, I'd add that the actual process of going through an inspection is EXTREMELY valuable to a new or inexperienced investor.  By that, I mean you actually walk, crawl and climb alongside the inspector into every crevice and inch of your prospective new property.  You learn so much from doing this - not only about your prospective property but also what to look for in future investments.  1000% recommend an inspection! Good luck!

Russell Brazil · Answer

The 2 have nothing to do with each other.

Brian Prudden · Answer

@Clay Couvillon the inspection could also give you a chance to negotiate the price down .

Jason Hirko · Answer

The thing I look for right away is comp distance and comp DOM. If it is a cookie cutter suburban neighborhood for example, and the appraiser is having to go two  or three miles away to find good comps, then that tells me there is not as much turnover of that type of house in that price range as if he's able to find 3 comps on the same street. I feel much more confident in knowing that there are 30 comps he could have chosen and he picked the 3 best than if there were 5 comps and he picked the 3 best. I look at the adjustments the appraiser has to make - the more there are, the less confident I am that the comp is reliable. If you have a good appraiser, and they are making a lot of adjustments, that's a good indicator that your property is less similar than other properties in that price range in your area.  I have also had appraisers' square footage measurements be off by 40%+ of what the county records say, as well as other discrepancies that could affect the value or saleability.

I guess that's all to say that there is not one piece of data you can pick out of an appraisal, but it is certainly valuable information if you know how to read it. I see people all the time treating surveys the same way: my lender requires it, so I have to pay for it, and never looking at the information that it contains.

Ryan Evans · Answer

If you have to ask then yes, absolutely get an inspeciton. Until you're an expert in rehabbing properties you need someone on your side. Plus, if nothing else it gives you an easy out of the deal when something unexpected pops up.

Joe Splitrock · Answer

As everyone else said, the appraisal is required by the bank and is just an estimate of value to support the loan amount.

The quality of inspections varies greatly. Some are just high level and others go as far as testing every drain, opening every window, testing every outlet, etc. Some even run a camera down the sewer drain. Get a thorough inspection or don't bother.

PRO tip: Inspectors always find problems. I make sure to ask for concessions that are equal to or greater than the cost of the inspection. That makes the inspection basically free.

Adriel Hsu · Answer

@Clay Couvillon as others have said, the 2 are independent of each other.The appraisal is needed for the lender to verify they are not over-leveraging debt on the asset.  It is also good insight on what factors in your home affect the value.  You can see how much a 1-car garage vs a 2-car garage affects appraisal, granite counters vs no granite counters, etc.For example, in my market, granite countertops are a $5,000 bump in the appraised value.The inspection is more geared towards finding what's wrong with the property (what's not up to code, safety issues) and making everything is in good condition and working as it should (electrical is wired correctly, plumbing drains well, no mold or termite damage, structurally sound roof, etc.)  This can be used to give you a better scope of rehab for more accurate numbers or to catch things you may have missed in your walkthrough

appraisal vs. inspection????

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