Anyone who has looked into buying a home has discovered a world with its own language.  From the application to the purchase to living in the home and paying the taxes, it is a far different world. You probably wonder why this is not covered in school. We wonder the same thing.

There are Three terms that are often discussed during the buying and owning stages. It is imperative that you have a full understanding of these terms, and we are here to help.

Home Inspection

The Home Inspector is your expert in going over every aspect of a home with an eye toward any damage (visible and hidden). These damages can be found in the structure, electrical, roof, plumbing, pests, mold, major appliances and more.

The inspector’s job is to provide you, the buyer, with a report. Learn what you can expect on a home inspection report here. It takes away the emotion from the transaction and gives you a precise and detailed critical look at the home as a product. This is often a 10, 15 or even 20 page report pointing out the good and the bad. It allows the buyer to  use that information in the “offer” process. You deserve to purchase and move into a home with no surprises. No one wants to move in and then get hit with the bad news that they have to spend thousands fixing a roof or replacing the pipes.

Robert Palmer, financial and home buying expert, always suggests the inspection occur before the appraisal. Because, what’s the use in attaining the value of a home on face value alone? You might find that there are so many problems with the home that you have wasted your time.

At the very least, you go into the offer phase armed with a list of items that need to be fixed by the seller. The Home Inspection Report is the property of the potential buyer and often times is not used by the lender. However, the lender may request the report if the appraiser points out certain conditions.

Appraisal Process

While many lenders use an appraisal management company, certain mortgage companies like the one found here, work directly with a select group of highly reputable and skilled appraisers. This results in faster and more precise appraisals and lower costs, which is something that every homebuyer can benefit from.

So the appraiser’s job is to give the lender an accurate value of the house. The appraiser is paid to take a long hard look at the home from a “value” standpoint. Many people will go to great pains to clean a home in an attempt to effect the appraisal, which actually does very little in adding value. Sure, the appraiser doesn’t want to walk into a mess, but he or she is there to verify square footage, the number of rooms, bathrooms and amenities like flooring, countertops, appliances included in the sale.

The appraiser also looks for problems with the house, like the following:

  • Leaking Roof
  • Broken Windows
  • Missing Fixtures
  • Faulty Appliances

Just to name a few examples.

While the home inspector toured the home to furnish a list of problems, an appraisal is for the benefit of the lender who must decide if the home is worth the asking price, and if this is a transaction they want to be part of. Keeping in mind that they might get this house back at some point if the borrower cannot make the payments.

Your home is then compared with the most similar homes in the neighborhood that have recently sold. Of course, not all homes in a neighborhood are exactly alike. But if you have a 2,000 square foot home with 3 bedrooms and 2 baths, custom cabinets and flooring, while one or two homes down the street with a similar description sold for $180,000.00 recently, the appraiser can come up with a “comparable” price structure.

Should there be no home in the neighborhood that is very similar in square footage and amenities, the comparison has to be adjusted.

Let’s say for instance the last homes sold in the neighborhood were only 1800 square feet, then the value of your home will be somewhat based on what those homes sold for and adjusted up to account for the additional size of your home.

The Appraisal is shared with the buyer. That was not always the case in home evaluations. It is highly suggested that the buyers take the time to review the document. This way they can see what other homes have sold for in the area. This increases the understanding of what the lender will actually loan on the home.

If a buyer does not read the appraisal and they are seeking to borrow $220,000.00 but the lender is only willing to loan $205,000.00, the buyer gets upset with the mortgage company and accuses them of blowing the deal. But, if one reads the appraisal and talks with the lender and their buyer’s agent realtor, they can actually propose a lower buying price and save money.

In other words, why would anyone want to spend more for a product than it is worth? We look for the best price on everything (STR #1) from food to televisions, so what makes a house different. Well one glaring difference is that you might save a dollar on a grocery item, but you could save thousands on A HOME !

The appraisers job is to make sure you are not buying a home for more than its worth and moving into house already “under water” or “upside-down”. Over time people have sought out an appraiser that will justify a higher price. But that causes problems down the road and so much so that the Fannie Mae is rolling out a new program that will run an automated check on all appraisals before closing on a loan.

Assessed Value

Now, if the appraisal is accurate and we base the purchase on that figure, why doesn’t it match the tax office’s “assessment”? Confused?

Across the country and most often in the same state county “assessments” vary widely.

In Central Florida a home in Seminole County may very well be assessed much higher than a similar home in Lake County. And in almost every instance, the appraised value of the house and the assessed value are different, And thankfully so.

The usual difference is about 25% between the appraised value of the home and the tax assessment.


So in closing, there are three parts to this equation.

Your have your home inspector who looks out for the interest of the buyer and the lender by creating a pre purchase list of problems with the home.

Secondly, the lender contracts for a professional appraiser who has the job of discerning an accurate value of a home to protect both the lender and the buyer.  This can be huge for the buyer when asking for a lower purchase price or concessions from the seller.

And finally, the county employs an assessor who determines the assessed value of homes in the county for the purpose of collecting enough property taxes to provide services to the taxpayers such as roads, law enforcement, sewers, libraries, courts, jails, recreation, schools and more.