Home Inspections vs. Appraisals: How It All Works in Washington

Home buyers in Washington sometimes confuse the home inspection with the home appraisal, believing that they are one and the same.

In reality, they are two different procedures with very different objectives. Inspections focus on the condition of the property, while appraisals focus on the estimated market value.

In this article, we will explore the key differences between home inspections and home appraisals in the state of Washington. You’ll learn what they are, who they are for, and whether or not they’re required when buying a house.

Home Inspections Focus on the Condition

A home inspection is a non-invasive, visual examination of the physical structure and systems of a home. It’s conducted by a qualified home inspector. The purpose is to identify potential problems with the home’s foundation, roof, plumbing, electrical system, HVAC system, and other major components.

In Washington, the home inspection process can vary based on the property’s age, size and location. Additionally, different inspectors might go about their work in different ways. So you want to be sure you ask about the specific checkpoints before hiring an inspector.

The home inspection benefits the buyer, exclusively. The buyer selects and hires the inspector, pays for the inspection, and receives a detailed report of the findings. The point of a home inspection is to give you better insight into the condition and identify any problems or items in need of repair—before you finalize the deal.

But the benefits go far beyond that. A home inspection can also give you peace of mind while helping you avoid buying a “money pit” property that has a lot of current or potential issues. Think of it as a form of due diligence.

In the state of Washington, home inspections are entirely optional. There is no state law or mortgage loan requirement that mandates an inspection. As the buyer, it’s entirely up to you whether or not you want to have the property inspected prior to purchasing it.

The cost of a standard inspection in Washington can vary due to a number of factors. But it typically averages somewhere between $300 and $500. When you compare this cost to the amount of money you’re putting into the home, you might decide that it’s a worthwhile investment.

Home Appraisals Focus on the Value

A home appraisal is a professional opinion of the value of a home. In Washington, home appraisals are conducted by licensed appraisers who receive training in residential real estate valuation.

The primary purpose of the appraisal is to determine the current market value of the home, based on its size, location, features and condition.

In Washington, appraisals are almost always required when a mortgage loan is being used to finance a home purchase. Banks and lenders use these appraisals to make sure they are not lending more money than a property is worth, based on its estimated resale value.

As with the home inspection process mentioned above, property appraisals can vary due to a number of factors. But they usually include some or all of the following steps.

• Property inspection: The appraiser will visually inspect the property, inside and out, to assess its condition. But this is a more limited evaluation, when compared to the more thorough home inspection process described earlier.
• Comparable sales: The appraiser will research recent sales of similar properties in the area to find out how much they sold for. They will consider the size, condition, location, and other factors of the comparable properties.
• Analyzing market trends: The appraiser will analyze market trends to see how prices have been changing in the area. They will consider factors such as economic conditions, interest rates, and the supply and demand for housing.
• Making an estimate: Based on their inspection, research, and analysis, the appraiser will make an estimate of the property’s value. This estimate is called the appraised value.

Government-backed mortgage loans (like FHA and VA) work a little differently. They too require a home appraisal to determine the property value. But with FHA and VA loans, the appraiser will also perform a basic inspection to make sure the home meets the minimum property requirements established by the FHA or VA.

While home inspections are optional in the state of Washington, appraisals are usually required if the buyer is using a mortgage loan. We touched on the reasons for this earlier. The lender wants to make sure that the home is worth at least the amount of money they are lending to the borrower.

In a typical mortgage scenario, the lender will invest more money into the home than the buyer does. So they want to determine the value of the property ahead of time, before funding the loan.

If the home appraises for less than the agreed-upon purchase price, the borrower might have to come up with more money to close the deal. Alternately, the buyer could ask the seller to reduce the price to reflect the appraisal amount.