Appraisal vs Inspection: What’s the Difference?
Though they have their similarities, home appraisals and inspections differ in a few important ways. Click here to learn more.
Written by Andrew Biro
Reviewed by Melanie Reiff
If you’re in the early stages of buying a home, learning to distinguish an “appraisal vs inspection” may come as somewhat of a surprise, as many mistakenly believe them to be the same thing. An appraisal is done to assess the home’s value, while an inspection is conducted to assess the home’s condition and safety.
When purchasing a home, most mortgage lenders will require you to schedule both an appraisal and inspection before approving you for a loan—but even if they don’t, it’s still a good idea to do them for your own sake.
Of course, it won’t do you any good to schedule these services without knowing what they actually entail or how they differ from one another. That’s why
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Appraisal vs inspection—what’s the difference?
If this is your first time buying a home, you may be a bit confused about the difference between an appraisal and inspection, as they do touch on a few of the same general ideas—but despite the similarities they share, there are a few key distinctions to note.
Appraisal
An appraisal serves as a way to determine the fair market value of the home you’re looking to buy. During this service, a licensed professional appraiser will conduct a thorough walkthrough and assessment of the property.
They’ll compare the home’s location, features, and a few other factors with the specs of other recent sales in the area.
This ultimately helps ensure that the home’s value is not being overestimated by the seller and that you are being charged a fair price for the home. Expect to pay between $350 and $450 for an appraisal.
Inspection
On the other hand, an inspection focuses on the actual condition of the home and its systems. When you schedule an inspection, a licensed professional house inspector will come out to the property and spend a few hours going through the home and testing appliances, plumbing, and other systems to ensure everything is in working order.
The inspector will take note of any items that may need to be replaced or repaired, giving the prospective homebuyer a better idea of what future repairs they can expect should they decide to buy the home.
Where an appraisal seeks to determine the value of a home, an inspection seeks to ensure that the home is safe to live in. Expect to pay between $250 and $700 for this service.
How does an appraisal work?
When you schedule an appraisal, the appraiser—who is usually chosen by your lender—will visit the property, take stock on a couple of key factors, and then go back to their office to figure out what the home is actually worth.
Process of an appraisal
An appraisal consists of three key parts: the actual property assessment, review of comparable sales, and final report.
- Property assessment: the appraiser will walk through the home and take note of the location, finishes, and condition
- Review of sales: using their findings from the assessment, the appraiser will compare recent sales with similar homes to decide a fair market value
- Final report: once the appraiser has finished their report, they’ll deliver a physical copy to the buyer and the lender
Often, the appraisal will come back higher than the asking price, which means you’ll be paying less than the fair market value for the home—and if the appraisal comes back low, the seller may be persuaded to lower their asking price.
Is an appraisal required?
If you are purchasing a loan to help pay for the property you intend to buy, your lender will usually require that an appraisal be conducted before allowing you to close on the loan—and if you are using a VA or FHA loan to buy the home, an appraisal is a definite, non-negotiable requirement.
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How does an inspection work?
Depending on the buyer, a home inspection may take place before making an offer or after making a contract with the seller.
If you need a recommendation, ask your agent and they can help decide what is best.
Process of an inspection
Once an inspection is scheduled, expect it to take roughly three to four hours. The inspector will visually examine the property and test the functionality of the home’s systems, including the plumbing, HVAC systems, appliances, etc.
Inspectors will also check for water damage and mold, inspect the foundation, and verify that the roof is in good condition to ensure that everything is up to code and that there are no health risks on the property.
If you want to go the extra mile, you can also request specialized inspections focusing on pests, radon gas, lead paint, and other such hazards.
As the buyer, you should be present during the inspection—as should your agent—so that you can familiarize yourself with the home and can ask questions in real-time. Once the inspection is finished, the inspector will write up a report highlighting their findings.
Is an inspection required?
Generally speaking, an inspection is not a set-in-stone requirement when buying a home, though your mortgage lender may ask that you schedule one before agreeing to close on the loan. But even if it isn’t required, an inspection is still recommended—they usually only cost a few hundred dollars and can potentially save you from having to deal with much more expensive issues down the line.
Appraisal vs inspection—how are they similar?
Of course, appraisals and inspections do have their similarities. They:
- Are both conducted by impartial, third-party professionals who have no real stake in the results, making it that much easier to trust their findings
- Are both paid for by the prospective homebuyer, though the homebuyer rarely chooses the appraiser
- Help bring to light any issues that may negatively impact the sale of the home, allowing you to make a more informed decision about whether to buy the home or look elsewhere
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What’s the difference between a home appraisal and inspection?
A home appraisal focuses primarily on determining the fair market value of your home, using the sale of comparable houses in the area as a benchmark. An inspection deals more with the condition of the home and its systems to flag potential safety and repair issues.
What if my home appraisal comes back low?
While it’s not common for home appraisals to come back low, they aren’t unheard of, especially if your area is currently in a seller’s market. If you’re the one buying the house, a low appraisal will likely be to your benefit, as the seller may be persuaded to lower their original asking price.
If the home appraisal comes back low and you are the seller, you have a few options: ask that a second appraisal be conducted, dispute the appraisal, or lower your asking price.
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