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  • Writer's pictureTeam Pinto

Understanding The Key Differences Between Home Inspections and Home Appraisals

It is important to note that when you are buying a Waterloo Region home, appraisals and home inspections are key parts of the home buying process and the larger transaction process. But understanding the difference between the two is something some buyers - especially first-time buyers - struggle with. Aren't they the same thing?

Both appraisals and home inspections fit into the puzzle that makes up buying a home. It is recommended that before you officially close on your home, you have your home inspected by a professional home inspector and if you will be taking out a mortgage to buy the property your lender will almost certainly insist that it is appraised by a professional real estate appraiser. And no, they are not the same thing, which is what we'll be discussing here today.

The Key Differences Between Home Inspections and Home Appraisals

Key Points for Home Inspections

Before you close on a house, you'll almost always need a home inspection. It's not a requirement, but it's a smart move. You should get a home inspection to learn about the state of your soon-to-be home and any major flaws it may have. However many times you and your real estate agent walk through a home there may be things you just can't see, but that can be uncovered by a good home inspector.

As a seller, you may want to get your property examined by a home inspector before listing it for sale to learn about any major flaws so that you are better prepared to negotiate with potential buyers.

Home inspections are not intended to reveal everything; rather, they are intended to assist you in ensuring that you are purchasing a safe home free of serious structural flaws, safety issues, health dangers, and so on, or, as a seller, that there is nothing you have missed that may derail a home sale. Our article here goes into exactly what a home inspector does in far more detail.

Why are home inspections important?

While your soon to be home might appear to be in great shape, you should always have a home inspection because no home is perfect. Therefore, chances are that you will find that your home has defects or things that need to be repaired.

Having your home inspected before you close on your home and move in is meant to help you avoid encountering any nasty surprises once you have moved in that could end up costing you a lot of money.

A great home inspector can help you to learn more about your home and even help teach you how to maintain your home if you are a first time home buyer. You are better spending the money now to hire an experienced, professional home inspector to come to inspect your home, so you will learn about any deficiencies your potential new home might have so you can ideally avoid having to spend thousands of dollars later for repairing things a home inspector would have uncovered.

Additionally, if the home inspector’s report indicates the presence of major deficiencies in your home, it is recommended that you negotiate with the seller to see if they will fix these deficiencies or provide you with a discount that will be equal to the cost of fixing them before closing on your home and moving in.

Whether you are buying a newly built home or a home that is 300 years old or anywhere in between, you should always have a professional home inspector come and perform a general home inspection before closing on your home. We cannot emphasize enough the importance of home inspections and how important they are as a preventative measure and tool to help you learn about your potential new home.

You might not be able to negotiate with the sellers to have them discount your home’s sale price to cover the cost of having these repairs done. However, depending on the contingency clauses in your contract, you might be able to back out of a deal and have your deposit returned if you learn that you might be potentially buying a money pit.

Who performs home inspections?

Ideally, a licensed or certified professional home inspector will be performing a home inspection.

What is a home inspector tasked with doing?

A home inspector is tasked with providing whoever is paying them - buyer or seller - an objective visual examination and their observations on a home’s physical structures and systems, from the roof of a home down to a home’s foundation.

Key Points for Home Appraisals

There are several instances when you might have your Waterloo Region home appraised.

  • You might have your home appraised for a real estate transaction if you are looking to refinance your mortgage and/or for insurance purposes

  • Appraisals are usually for a real estate transaction or for lenders when you are trying to qualify for a mortgage. In this scenario, an appraisal is meant to help with determining a home’s fair market value.

  • If you are having your home appraised before closing on the home, an appraisal is meant to help you from overpaying when buying a home and to ensure that if you are receiving the financing you are not overborrowing

  • An appraisal for insurance purposes is important because it can help ensure that you are getting the coverage you need to ensure your home and all of the contents inside your home.

Who performs home appraisals?

Appraisals are performed by professional real estate appraisers or by professional insurance appraisers depending on who you are having the appraisal done for.

What is an appraiser tasked with doing when they are performing an appraisal?

A real estate appraiser is tasked with looking at and assessing the value of a property, a home, and its fair market value without the occupant’s personal effects.

Their assessment of a home’s value is in part based on: the size of the home, the quality and workmanship that built a home a home’s “bones,” the condition the home’s interior and exterior are in, how many rooms a home has, how functional a home is, any amenities, and the size of the lot the home is on. They will also be looking at the sale prices for recent sales of comparable homes in the neighbourhood and area, and current market trends.

Why are home appraisals important for lenders?

You mortgage lender will , as we mentioned, usually insist on an appraisal. But why? Especially if a home inspection has already been performed?

Lenders use the report from an appraiser to help ensure that their customers are not over-borrowing when they are purchasing a home and qualifying for a mortgage or refinancing an existing mortgage. Lenders use appraisals to help them to determine how much money they should be lending when giving mortgages and loans because the home or property will serve as collateral for a mortgage or a loan.

Given that the home will be used as collateral for a mortgage if a borrower defaults on their mortgage and ends up going into foreclosure, the bank or financial institution giving out this loan wants to ensure that they will be able to sell the home as a way to recoup the money they lent the borrower to buy the home and recoup their losses.

In this scenario, we can think of an appraisal as a tool that lenders use to help protect themselves against over-lending and needing to recoup additional losses if a homeowner’s home goes into foreclosure.

An appraisal is meant to help banks mitigate some of the risks that are a part of lending and mortgages by helping to ensure that they are not loaning more money than a home is actually worth.

Why do insurance companies order home appraisals?

Home appraisals are important for insurance purposes because they can help you to work with your insurance company to create a policy that is best suited for you and your needs. An insurance appraisal is not meant to determine your home’s fair market value.

An insurance appraisal is intended to help your insurance company create a fair premium schedule that you can pay for a policy that will be designed to cover your home and all of your belongings in the event they are damaged, and they need to be replaced.


Hopefully, after reading this article, you will have gained greater insight into the importance of home inspections and appraisals. You should now clearly understand in what instances you can expect to have your home appraised and in what instances you can expect to hire a home inspector, and have a greater idea of how much you might be able to expect to pay to have your home inspected in Ontario and how much you can expect to pay to have your home inspected in Ontario.


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