Portland Home Inspection vs. Home Appraisal

home inspection vs home appraisal

For many people, buying a home is one of the most complicated transactions they’ll ever experience in life, especially if they’re also selling a home at the same time. Wherever you are in your real estate phase of life, it helps to know or be reminded of the various parts of the process.

Involving yourself in a real estate transaction can be a stressful and emotional time. Having insight about what’s happening and why can help alleviate a lot of the anxiety and questions.

In this article, we’re focusing on the difference between the home inspection and home appraisal, what they accomplish, and when they come in the process.

What and When is a Home Inspection?

The home inspection happens after the seller has listed their home on the real estate market and a potential buyer submits a written offer. Typically the buyer has two weeks after the seller accepts their offer to conduct home inspections. The purpose of this phase of the process is to inform the buyer on the condition of the property. The inspection will provide insights about the home’s foundation, electrical, plumbing, HVAC, the roof, structural aspects, and more.

In most cases, the buyer pays for the home inspection, which is typically conducted by a licensed contractor. You can search for a contractor on your own, or your real estate agent can help give you some tips for this phase, along with a list of reliable inspectors.

Sometimes, sellers do a pre-listing inspection to get a jump on any issues the home may have. This will allow them to take care of repairs or renovations, or to at least know what might be cause for valid negotiations from the buyer. However, if the seller chooses to pre-inspect they should be prepared to make repairs / corrections to whatever is found, for the results of pre-listing inspections (the full report) must be made available to prospective buyers. In my experience I’ve found even if the seller pre-inspects and provides the report, the buyer will still want to conduct their own inspection, which may lead to more repairs being done to the house overall.

What is not a Home Inspection?

Note that home inspection here does not include the Home Energy Score Assessment now required by the city of Portland. The city of Portland mandated that sellers obtain a home energy score prior to going public on the real estate market back in 2018.

Also, the seller’s property disclosure statement isn’t part of the home inspection period. It is a questionnaire about the home that details out the seller’s knowledge of the home and land. Typically in Oregon homes are sold as-is – all sales are final – expect for the property disclosures. If the buyer can prove the seller falsified their answers on the property disclosures, then the buyer might have some recourse after the home is sold. This is why home inspections are so important and recommended. Sellers are not expert contractors and going off their knowledge about their home and land often isn’t enough.

How is a Home Inspection Conducted in Portland?

Home inspections generally take about 2-4 hours for an average-sized home. After its completion, the contractor will create a report, usually within a couple of days, which will outline all issues found during the inspection.

It’s customary for the buyer to attend the inspection. This sometimes unnerves owners, but think of it this way: Having the potential buyer present to ask questions about aspects of the home that matter to them will lead to a more efficient inspection process.

So what about the credibility of the inspector? In Oregon, the home inspector should be certified as a licensed construction contractor or must work for a licensed construction company. Also, Oregon home inspectors are not allowed to perform work on a home they’ve inspected for twelve months after the inspection. Also, they must inspect at least two areas, systems, or features of a home. For example, a plumbing contractor can’t come in and only inspect the plumbing then report that the home needs new plumbing. If a contractor does suggest repairs or renovation on any aspect of the home, the owner has the right to vet other contractors who specialize in that particular area for advice about how to move forward.

If issues with the property are revealed after the home inspection, negotiations between the buyer and seller happen, often extending the inspection period as needed until the issues are resolved.

How do you Prepare for a Home Inspection?

As the owner, you help the process by taking a few steps, some of which may have already been done when you prepared your home for sale.

  • Clean up and organize your basement to ensure an unobstructed path to your furnace, water heater, HVAC unit, and anything else that will be inspected.
  • Do the same for your attic. Make sure if there is a hatch it is accessible.
  • Double check that all pilot lights are on so the inspector can check appliances and the heating system.
  • Make sure your septic tank, crawl space, and drainage points are easily accessible.
  • Leave keys and codes for the inspector if they’re required to access panels or other parts of the property.
  • If you have moved out of the home and turned off the utilities, call to have them reconnected prior to the inspection.

What is an Appraisal?

Getting an appraisal on a home typically requires another visit to the house, a walk-through inspection of a different kind. The appraiser has two primary purposes, first to determine that the buyer’s offer price is supported by the real estate market (not too high) and second that the home doesn’t have any health or safety concerns. Whereas the home inspector is working on behalf of the buyer, typically the home appraiser is working on behalf of the bank or lender. The appraisal inspection is conducted by a professional licensed appraiser.

Keep in mind that if the appraisal comes in under the sale price or is found to have health and safety issues, the lender will likely put a pause on the sale. To remedy the situation, the seller will have to reduce the price, the buyer will have to bring in extra cash to cover the difference, or some combination of the two.

What health and safety issues does a home appraiser look for? Most of the time the home will need to have working utilities: plumbing, electrical, heat. It will also need to be water secure, no leaking roof or water intrusion. The home will need to have no fall hazards (think of railings and handrails) as well as no obvious toxic health hazards like visible mold or other growths inside the home. The siding will need to be secure, no exposed wood (needs to be sealed or painting) or missing parts.

How is Home Value Assessed in an Appraisal?

During the appraisal process, the appraiser looks for features, conditions, and possible defects that affect the value of the home. They will use one of three different approaches in determining the home’s value:

  • Sales comparison—This approach involves a comparison of the home for sale alongside other similar homes with similar features in the same area or neighborhood. The sales comparison appraisal is the most common.
  • Cost approach—This approach entails calculating the cost of a new construction on a property similar to the one being appraised, based on local labor rates and building costs. The cost approach is less common and is often used when there are no recent reasonable sales comparisons.
  • Income approach—This approach would be used only if the transaction involves property being sold/bought as a business investment.

Learn more about home appraisals in Oregon.

Home Inspection vs. Home Appraisal Comparisons

Here’s a bird’s eye view of the differences between inspections and appraisals.

Home InspectionHome Appraisal
What’s its purpose?To assess the condition of the home.To determine the value of the home and look for health and safety issues.
Is it required?No, but it’s highly recommended for the buyer.Yes. The lender will typically require it unless the transaction is cash.
Who pays for it?The buyer. The buyer, but the cost gets folded into their closing costs.
Who performs it?A licensed contractor who is required to follow certain regulations to prevent biased or unethical results.A licensed appraiser, chosen by the lender usually through a random selection service.
When does it happen?After an offer is made and accepted.Usually right after the buyer’s inspection period is over.
How does it impact the transaction?If issues are found, they may create room for negotiations in favor of the buyer.If the the value of the home is determined to be under the buyer’s offer or if there are health and safety concerns, the lender may stop the loan process.

Set Yourself up for a Positive Real Estate Experience

The best way to have a positive experience selling or buying a home is to go through the process with a trusted real estate agent. If you’re read to make the move, we’d love to be by your side from listing to inspection, appraisal to closing. Our small local team has completed over 2,000 home sales. Contact our top 1% buyers agents and our top 1% sellers agents directly today, or chat with the bot on our site.

April 22, 2022

Stephen FitzMaurice

Stephen FitzMaurice, Realtor is a top 5% real estate agent in the U.S. A Principal Broker in Oregon, Managing Broker in Washington, he has been licensed since 2003 for residential real estate sales. Call his team in Oregon at 503-714-1111 or in Washington at 360-345-3833.

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