Question 1

What is the difference between an appraisal and an inspection?

Accepted Answer

Appraisal: The primary purpose of an appraisal is to determine the fair market value of a property. Lenders typically require an appraisal to ensure that the home is worth the amount they are going to lend the buyer. An appraiser, who is a licensed and certified professional, is usually hired by the lender. In some instances, such as a cash purchase, the buyer may hire an appraiser to be sure they are not overpaying. The appraisal typically focuses on valuing a property based on its size, condition & updating, location, comparable sales in the area and the overall market conditions. Upon completion of the appraisal, the appraiser will submit an appraisal report that includes the property’s estimated value.

Home Inspection: A home inspection is a more detailed examination of the property’s condition to identify any defects or needed repairs. It will focus primarily on the structural integrity including roof, siding & foundation, plumbing, electrical, heating & other systems, attic & crawl space, insulation, windows & any other potential issues. It may also include an inspection for pests & wood-destroying organisms. An inspection can be conducted by the buyer themself or by a licensed, certified home inspector hired by the buyer to inspect the home on their behalf. Once completed, the inspector will provide a detailed report outlining and photo documenting any issues found. The report serves to provide the buyer with information to make an informed decision about the purchase as well as serving as a tool for negotiation with the seller to address identified concerns.

Question 2

What is the difference between an appraisal and a tax assessment?

Accepted Answer

Appraisal: The primary purpose of an appraisal is to determine the fair market value of a property. This is an occasional process and is not regular or recurring. An appraisal is usually required by a lender to ensure that a home is worth the amount they are going to lend the buyer. An appraiser, who is a licensed and certified professional, is usually hired by the buyer’s the lender. In some instances, such as a cash purchase, the buyer may hire an appraiser to be sure they are not overpaying. In other instances, a seller may hire an appraiser to provide an independent and unbiased valuation of their property. The appraisal typically focuses on valuing a property based on its size, condition & updating, location, comparable sales in the area and the overall market conditions. Upon completion of the appraisal, the appraiser will submit an appraisal report that includes the property’s estimated value, which may influence the financing terms. A high appraisal may allow for a higher loan amount, while a lower appraisal may force purchase contract negotiations or impact the loan amount.

Tax Assessment: A tax assessment is used by local government authorities to determine the value of a property for calculation of taxes that the property owner must pay.
Tax assessments are usually conducted by the local government's tax assessor's office on an annual or biennial basis. The assessment is based on various factors and may not include a physical inspection of the property. The tax assessment criteria may be based on the local government's predetermined assessment rate, recent sales in the area, and factors specific to the local tax code. It will likely not reflect the property's current market value. The tax assessment directly affects the property owner's property tax liability in that a higher assessment usually results in higher property taxes due.