Does an Appraiser Look at an Inspection Report?

Home appraisals and home inspections are two distinct, yet important, processes in a real estate transaction. While both involve a professional evaluating a property, their purposes and methodologies differ significantly. Understanding these differences, particularly whether an appraiser considers an inspection report, is essential for buyers, sellers, and lenders.

The Distinct Roles of Appraisers and Inspectors

Appraisers and home inspectors serve separate, specialized functions within the real estate market. A real property appraiser’s role is to provide an independent, unbiased estimate of a property’s market value. This valuation is required by lending institutions to ensure the property’s worth supports the loan amount, and it considers factors like general condition, comparable sales, and broader market trends.

Appraisers operate under the Uniform Standards of Professional Appraisal Practice (USPAP), which mandates ethical and competent performance. Conversely, a home inspector’s purpose is to conduct a visual examination of a property’s major systems and components. This includes assessing the condition of the HVAC, plumbing, electrical systems, roof, and foundation. Inspectors focus on identifying significant defects, safety concerns, or issues affecting functionality or safety, rather than its market value. The core difference lies in their objectives: appraisers determine value, while inspectors assess physical condition and identify defects.

Appraiser’s Approach to Property Condition

Appraisers do not review or rely on home inspection reports for their valuation. This practice stems from the appraiser’s requirement to form an independent opinion of value based on their own observations and market analysis, adhering to USPAP guidelines. An appraiser’s scope of work involves a visual observation of readily accessible areas for obvious deficiencies, but it is not a detailed or intrusive examination. They are trained to identify elements that influence market value, such as overall property condition, major deferred maintenance, and features impacting marketability.

If an appraiser observes a significant issue during their visit, such as structural concerns, health and safety hazards, or severe deterioration, they will document these findings in their appraisal report. For instance, they might note a leaking roof, visible foundation cracks, or exposed wiring. The appraiser does not require a home inspection report to identify such concerns, as their assessment is based on their own professional judgment and the property’s observable characteristics. If these issues are substantial enough to affect market value or lender requirements, the appraiser may condition the appraisal on further inspection or the completion of repairs.

When Inspection Findings Influence Appraisal

While appraisers do not use inspection reports directly for their valuation, significant issues uncovered by a home inspection can indirectly influence the appraisal process or the real estate transaction. When an inspection reveals major defects, such as structural damage, extensive mold, or electrical problems, these findings often lead to negotiations between the buyer and seller. The agreed-upon repairs or financial concessions can affect the net purchase price, which then impacts the appraiser’s consideration of market value.

Lenders mandate that certain health, safety, or structural issues be rectified before a loan can be finalized, particularly for government-backed loans like FHA or VA loans. If an inspection identifies such issues, the lender may require the appraiser to appraise the property “subject to” the completion of these repairs. This means the appraiser provides a value assuming the repairs are made, and a re-inspection is conducted to confirm their completion before closing. If major defects are known, even if not directly from the inspection report provided to the appraiser, the appraiser might consider the “cost to cure” these deficiencies in their valuation. The cost to cure reflects the estimated expense to correct a defect, impacting the property’s market value relative to comparable sales.