Home Inspections Are Not Appraisals

A property appraisal is a document that provides an
estimate of a property's market value. Lenders require
appraisals on properties prior to loan approval to ensure
that the mortgage loan amount is not more than the value
of the property. Appraisals are for lenders; home inspections
are for buyers.
The Federal Housing Authority (FHA), which is part of the
U.S. Department of Housing and Urban Development
(HUD), requires lenders to obtain appraisals of properties
securing FHA-insured loans. FHA requires appraisals for
three reasons:
The Importance of an Appraisal
Sales Comparison Market Approach
Cost Approach
Income Capitalization Approach
Home Inspections Are Not Appraisals
1) To estimate the market value of the property.
2) To make sure that the property meets FHA minimum
property requirements/standards (health and safety).
3) To make sure that the property is marketable.
The FHA appraisal process will note property deficiencies
that are readily observable and found not in compliance
with HUD's minimum property requirements/standards.
These deficiencies may not be the same as those items
noted in a home inspection report.

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