Appraisal Vs Home Inspection

Despite what most people think, an Appraisal and a Home Inspection are two different things. Appraisals are done on behalf of the bank/lender. The appraiser is there to make sure the bank/lender is not giving out more money they should on a property. It is to protect the bank/lender and make sure they are not throwing money away. Essentially if you ever are in the worst case situation and are being foreclosed upon, will the bank/lender be able to recapture their investment by selling the house to someone else.

Why is this important? Well one of the more popular ways to see what happens when this goes sideways is the movie “The Big Short”. In reality though, the payments you make to the lender, does not just go back to them, it goes to other investments….like your new next door neighbors mortgage. The money continuously moves to other investments to allow more people to buy houses. If those mortgage payments you were supposed to make stop, then the flow of money is interrupted. When enough of those happen, the system can break down because there just is not enough stability to loan out more money. Banks/lenders become much more cautious about who they will give out the mortgages to and the housing market slows down, which can also cause a “run on the banks”. Think back to “It’s a wonderful life” when everyone was trying to get their money out of the bank and Jimmy Stewart was explaining their money is not in the bank, but in their neighbors houses. It wasn’t physically in their homes, but on paper, it was invested in order to allow the other neighbors to actually purchase homes.

A Home Inspection is NOT done for the bank, with few exceptions. It is done for the buyer in almost all cases. It is done to review the home for Functionality and for Safety. We don’t talk about cost for anything, we don’t talk about the home value or any other thing related to price. In Massachusetts, we’re actually forbidden from talking about how much something will cost to repair. We look at items and talk about whether they are functional and safe.

This is also different from an Occupancy inspection done by the city/town to review for code adherence. Why don’t we look at code? It changes from town to town. More than that though, there are things that are considered to code, but can be improved upon to make things safer for people. We discuss those. A prime example of this is some gas piping. There is yellow flex lines, CSST flex lines (Which is also yellow in most cases) and there is also black iron. Flex line is allowed in most situations, but it really needs to be installed correctly. Granted, all gas piping needs to be installed correctly. That being said, in virtually all cases we come across, we’re going to point it out and recommend consulting with a plumber about switching it to black iron. Simply because black iron is rigid. It takes more effort to break them and drill through them by accident. The yellow flex may pass a code and occupancy inspection, but we’re going to explain the dangers of it that may not have been gone over. We’re about function and safety. While it is functional, and technically it is safe, we as Home Inspectors, want to educate you about your home and how to make it as safe as possible. It does not mean you need to take action and change out all of your piping, but at the very least, you will now have knowledge that you did not have before.

Another example of this is basement well windows. Depending on how deep the well goes down to the ground, we may recommend a railing or guard in front of it. People could fall into it without protection. Things like this are common to come across during home inspection. It’s simply that we know where the dangerous items are found and can recommend ways for you to fix them and protect you as well as your loved ones from taking a chance that could lead to harm. 

One final point to end this blog post with. By chance, I’ve met a good amount of people purchasing new construction homes recently. That is wonderful for them, it’s an exciting time and just like when you buy anything new, you assume there will be no issues that come up, because it's new. Most have told me they have not gotten a home inspection because they felt it was not needed, because it's a new home. They’ve passed occupancy inspections. That’s great, but new construction homes should still have a home inspection done. Things can be changed and altered after inspections take place. Not only that, but quite frankly, some of the new construction homes I’ve inspected have had some of the following issues. Again, past occupancy inspections, but here are some of the items found. Plumbing was run to fixtures but not connected to them, making the faucets not functional. AC condenser units that were visibly not level, making them run harder and shortening their life span. Attics with inadequate ventilation, which is a sure way to help mold growth and cause ice dams in the winter. Missing drip edge flashing. Light switches that were not connected. Visible moisture intrusion on ceilings. Doors that appeared to not have flashing installed properly, allowing water to already leak into the house and start damaging the door frame and the floor behind it. Missing caulking around tubs and showers. Lastly in one case that was a complete renovation, so not technically new construction, there was no heat source in the house at the time of the inspection.

In our last blog post, we talked about how Home Inspections are a function of consumer protection. The Appraisal is to protect the bank/lender, the Occupancy inspection is to make sure the building complies with the local city/town codes to protect the citizens of the town AND those who protect it in emergencies, IE firefighters. The Home Inspection protects you, the actual person that is going to live there. Buying a home is an investment. One of the largest you are ever going to make. We call out functional issues and safety issues. This helps you follow up with others on what it will take to maintain your investment. When you waive the home inspection, the bank/lender is not going to waive their appraisal. If it’s a new construction or being completely renovated, the town is not going to skip their occupancy inspection. The only entity not actually having representation at that point is the one spending their money on the home. While we as a company completely understand the current climate of real estate offers at this point, we 100% disagree that waiving a home inspection is ever a good idea. If you need to waive it in an offer to get it accepted, that is between you and your real estate agent. However, you should still get a home inspection as soon as possible to help identify areas that need addressing and to learn a bit more about how to take care of the investment.


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