VA appraisals and home inspections are two critical pieces of the home-buying “puzzle.” What many people don’t know is that a VA appraisal is different from a home inspection, each service being designed for very specific purposes. This means that a VA appraisal cannot replace a home inspection, and vice versa.
VA Appraisals versus Home Inspections
To highlight the differences between VA appraisals and home inspections, we have decided to analyze these two services in relation to:
- Eligibility. To begin with, a VA appraisal is a common requirement for a VA home loan. Without a property appraisal, the VA lender won’t approve the loan application. Conversely, a home inspection isn’t required for a VA mortgage. However, buying a property without having it inspected by a professional is a bad idea, especially because there are many hidden issues that can affect a house, ranging from dry rot and mold growth to structural damage.
- Purpose. While an appraisal is performed to determine the current market value of a house for the purpose of lending, an inspection explicitly indicates the flaws and defects within a property to protect the interests of the buyer. As soon as the seller and the buyer sign a sales agreement, the contract is sent to the VA lender, who will order a home appraisal. To check if the home meets the VA’s Minimum Property Requirements (MPRs) and assess its market value, the appraiser will inspect the exterior of the property, looking for defects that can be readily seen. The market value can be adjusted based on the defects considered significant enough to negatively affect the condition of the property. Knowing the fair market value of a property can help both the lender and the buyer. While the lender makes sure that he’s not approving a loan for more than a home is worth, the buyer can rest assured that he’s not overpaying for the property. Most lenders establish the loan amount based on the lower appraised value in order to avoid a negative equity situation.
- Appraisal versus Home Inspection Report. Although a VA assigned appraiser is required to review the condition of a property in order to establish its value, the appraisal report doesn’t provide details on specific areas, such as the foundation, siding, roof, or electrical system. This means that a VA appraisal may fail to indicate important issues, such as wood decay, mold growth, leaking faucets, or a defective HVAC system. Unlike a VA appraiser, a home inspector has an obligation to describe each deficiency observed and inform the buyer about the actual condition of the property. Based on the inspection report, which typically includes detailed descriptions, photos, recommendations, and repair estimates, the potential buyer can determine if a property is in the condition he believed it was before signing on the dotted line. Then, he can decide to renegotiate with the seller or look for another property.
A property that passes the VA appraisal is safe and move-in ready. However, an appraisal doesn’t guarantee that the home is free of defects. On the other hand, an inspection provides valuable details about a property’s condition, helping a potential buyer to make an informed decision regarding his “dream home.” In conclusion, a home inspection shouldn’t be considered an option, especially for someone who wants to protect his investment. Furthermore, a potential buyer should have an inspection performed before moving forward with the VA loan application.