If you're new to the real estate market, there are dozens of terms and phrases that you'll hear during the home-buying process. In fact, many of these terms are used interchangeably when they actually mean defined processes in the industry. What's the difference between a home appraisal and a home inspection? It's important to understand both of these concepts.

Determining Value

A home appraisal tells you how much a property is worth. Many factors influence a home's value. Its size, building materials, location, and countless other features translate into a specific value. The lender requests an appraisal when an interested buyer is ready to purchase the home. An independent appraiser visits the home and takes a walk around the grounds. The appraiser looks at both the interior and exterior of the home.

Afterward, the appraiser performs other calculations based on similar properties in the area. The value derived from the visit and research is officially sent to the lender. It essentially tells the buyer and seller where the property falls in terms of cost. The value may or may not be the amount listed by the seller or real estate agent.

Qualifying the Condition

In contrast, a home inspection is a more thorough look at the property's condition. Another third party takes a look at the home. The inspector tests the major appliances, such as the plumbing, electrical, and HVAC systems, in order to see if they run as expected. They'll note any structural damages, missing items, or areas of concern.

This inspection is valuable to the buyer because it tells you if a home is worth the listing price. If the electrical system requires work, the buyer may ask for the system to be fixed prior to closing on the home. There won't be any repair surprises with an official inspection.

Requiring the Single Process

Keep in mind that every lender requires an appraisal. The real estate market isn't a fixed entity. Prices are constantly shifting for homes. It's possible for one home to be worth more in June than it was in May, for example. For this reason, lenders ask for appraisals so that they can carefully craft a mortgage offer.

They cannot lend more than the home is worth. The financial markets cannot bear mistakes that create lending issues. As a result, the appraisal becomes one of the most important parts of becoming a homeowner. Your property value will certainly fluctuate after the lending approval, but that's the natural state of the real estate world.

The inspection remains critical to the parties involved in the transaction. In the end, you're the one who'll live with a turnkey home versus a fixer-upper property. Although both the appraisal and inspection are critical to overall value, the appraisal is always a more important tool for the lender during the buying-and-selling period.

When you have questions about properties and buying possibilities, contact real estate companies in Baton Rouge, Louisiana. These professionals can guide you through the best strategies that may practically guarantee a solid sale. Knowing a little bit about the real-estate world will make any purchase easier for every party involved.