Home Inspection

What is a Home Inspection?

A home inspection is a non-invasive assessment of a property’s current condition – often conducted before buying it. Home inspections are typically performed by a professional home inspector who looks for malfunctions, any needed repairs, and other issues that need to be fixed.

Generally, a home inspector examines various aspects, including plumbing, the home’s structure, electrical work, heating and cooling systems, and other issues that may affect the property’s value. It is one way of reducing the risk of purchasing a home.

A home inspection is often confused with a home appraisal, which entails developing an opinion about a property’s value to determine the mortgage debt amount.

Home Inspection Explained

Prospective home buyers need a quick tour of a property to assess its condition before purchasing. Although home inspections are often associated with property buyers, sellers may also request one before selling a property.

Essentially, home inspection involves hiring a qualified inspector who physically observes the house from its foundation to the roof and records the results and opinions based on objective criteria applied. Only a qualified inspector with full knowledge of home systems, such as construction, installation, and maintenance, can conduct a proper home inspection.

An inspector uses an inspection checklist to guide them through the inspection process, ensuring that all aspects of a home inspection are covered. The list also serves as the checklist on which the inspector reports the property’s status. The inspector prepares a written report containing findings and necessary recommendations.

What Are the Elements Covered in a Home Inspection?

The party that requested a home inspection uses the report findings to make a buying or selling decision. The report describes the property’s current condition but does not guarantee its life expectancy or the future well-being of its systems. A home inspection can reveal more concerning information about the property, and eventually save a client from possible loss and aggravation.

A home inspector identifies needed renovations, maintenance requirements, and builder oversights. The process delays the purchase cycle and eventually helps the buyer/seller make a more informed decision on the pending property purchase. It also helps sellers to upgrade or restructure their properties before accepting an offer from a potential buyer.

The home inspection duration depends on the home’s size, the property’s condition, and the inspector’s level of thoroughness. It is always important for potential buyers to attend a home inspection.

How to Minimize Risks Using Home Inspection

On most occasions, a home inspection follows the completion of a purchase deal. The inspection contingency is, therefore, a necessity in a sales contract. It buys a seller enough time to request a home inspection and decide on the purchase based on the final report.

For example, a buyer may use the report’s assessment to continue with the sale schedule, depending on the property’s material or cosmetic defects. A buyer may also arrange another home inspection, cancel the contract, or request repairs. In the case of a major repair, a client may conduct another inspection to confirm whether the originally identified defects have been addressed.

While a home inspection helps minimize the risk of purchasing a property, it is not the only option. An alternative method may involve a buyer purchasing a property insurance policy to cushion them against costs for repairs and maintenance. Under such an approach, the home warranty industry writes blanket home warranty policies, rather than tailoring them to a home’s specific condition.

Home Inspection vs. Home Appraisal

Although home inspection and home appraisal are valuable steps when purchasing a property, they serve different purposes. During a home inspection, a professional inspector assesses the current condition of a house. It is the buyer who usually arranges for a home inspection.

A buyer may choose to attend the home inspection to become familiar with the property’s condition and safety. The process does not affect the amount that a buyer can borrow.

Conversely, a home appraisal is conducted by a real estate appraiser, who determines a property’s current market value. An appraiser is hired by the lender when a buyer applies for a mortgage loan. In addition, a home appraisal is conducted in the buyer’s absence.

Unlike a home inspection, a home appraisal can significantly affect the amount a lender allows the buyer to borrow. An appraiser can adopt various evaluation approaches to determine a property’s value, including its size, price, and quality.

Additional Resources

CFI is the official provider of the global Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

• Appraisal Costs
• Deductible
• Property and Casualty Insurers
• Named Perils Insurance Policy
• See all commercial real estate resources