Appraisal vs. Home Inspection: What Is the Difference?

Appraisals and home inspections are two distinct processes that serve different purposes. Many first-time buyers confuse them, but both play important roles in a real estate transaction. Here is what each one does and why you may need both.\n\nDifferent Purposes\n\nAn appraisal determines the market value of the property. The lender requires an appraisal to confirm that the home is worth the amount you are borrowing. If the appraised value comes in below the purchase price, the lender may not approve the full loan amount.\n\nA home inspection evaluates the condition of the property. The inspector looks at the roof, foundation, electrical, plumbing, HVAC, and other systems to identify defects, safety issues, and needed repairs.\n\nDifferent Professionals\n\nAppraisers are licensed professionals trained in determining property value. They look at comparable sales, property condition, location, and market trends. They do not test systems or identify specific defects. Their focus is on value, not condition.\n\nHome inspectors are licensed professionals trained in building systems and construction. They test, examine, and report on the physical condition of the home. Their focus is on condition, not value.\n\nYou May Need Both\n\nIf you are obtaining a mortgage, your lender will require an appraisal. It protects the lender by ensuring the property provides adequate collateral for the loan.\n\nAn inspection is not required by lenders, but it is strongly recommended for every buyer. It protects you by revealing potential issues before you commit to the purchase.\n\nIn a competitive market, some buyers consider waiving the inspection contingency to make their offer more attractive. This can be risky. Without an inspection, you may not discover expensive problems until after you own the home.\n\nMost buyers are best served by completing both an appraisal and a home inspection. The appraisal protects your lender and your investment. The inspection protects you from unexpected repairs and safety hazards. Together, they give you a complete picture of the property.