When investing in real estate property, two (2) major activities occur, property appraisal and property inspection. Some investors might not be able to differentiate between the two, and use them interchangeably.
To simplify these terms, when you think of a property ‘monetary value, then that is property appraisal. However, when you think of the property ‘the physical structure and features’, then that is property inspection.
In this blog post, you will learn about the key differences between both terms and other factors associated with them.
What Is Real Estate Property Inspection?
Real estate properties also undergo physical examination just as humans undergo medical examination to determine their health status. Property inspection is a physical assessment of both the interior and exterior of a property to determine its structural condition.
What Is Real Estate Property Appraisal?
Property appraisal is the evaluation of a property to determine its market value with its location, type, condition, title, etc. The appraisal report is often required for various purposes such as insurance, tax, and so on.
Key Differences Between Property Inspection and Property Appraisal
For this blog content, the differences between both terms will be categorized into three (3) major factors, which are;
- The purpose; which refers to why both activities are done.
- Property inspection done majorly to carry assess the property physical condition.
- Property appraisal is done to determine the market value of the property.
2. Elements; this refers to factors used in both activities.
- The property interior and exterior such as structure, roof, rooms, etc. are taken into consideration for property inspection.
- Factors like market data, property features, location are used to appraise a property.
3. Expected result; the ultimate outcome of the activity.
- Property inspectors provide the property examination report for decision making.
- Property appraisers share data on the appropriate market value of the property acquisition.
Importance of Property Inspection and Property Appraisal
Property Inspection
- It helps to identify any structural issue, damage or underlying problem on the property
- It helps buyers to identify and prepare for hidden costs on repair.
- It helps to ensure that the property meets building regulations and is safe for occupancy.
- It provide the investor with the peace of mind for a secured investment
- Inspection reports can be used in securing insurance schemes.
Property Appraisal
- It shows that the property is worth the sales price.
- It help to determine the interest rate on the property purchase
- Appraisal report can be used to access mortgage loan
- It helps to assess any risk or limitation on the property worth
- It helps to identify existing liens on the property
Preparing for Property Inspection and Property Appraisal
Property inspection and property appraisal is not peculiar only to the buyer or seller. While the buyer is assessing their investment worth, the seller must also ensure there are no issues or liens.
While the buyer is conducting due diligence by acquiring relevant data, the seller can prepare the property paperwork and permits. The purpose of this is to prevent any issue that can lead to the transaction being canceled. Also, the financial loss in the transaction process is on both parties, including the cost of getting inspection and appraisal.
Conclusion
Property inspection and property appraisal are very important in real estate transactions to ensure a smooth transaction process. Property inspections identify potential issues and hidden costs, while property appraisals establish fair market value.
At Sterling Homes Limited, we are not just about selling properties, we understand that your property is more than just an asset, it is an investment. This is why we always provide tips on property ownership to ensure our property investors maximize the full potential of their property.
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