What is the difference between a home inspection and an appraisal?

A home inspection evaluates the condition of the property, while an appraisal evaluates its market value. The inspection answers the question, is this home sound? The appraisal answers, is this home worth the price? They are both part of a typical home purchase, and neither can substitute for the other.

The confusion is understandable, since both involve a professional walking through the home and writing a report. But their purposes, their audiences, and their results are entirely different.

New buyers who treat the two as interchangeable make one of two expensive mistakes: they skip the inspection to save money and inherit a costly repair, or they expect the appraisal to catch defects and discover it never looked for them.

The inspection is for you, the buyer, and it assesses the home physical condition. A licensed inspector examines the roof, structure, electrical, plumbing, heating and cooling, and major components, documenting defects and items needing attention. The report tells you what might need repair now or in the future.

You hire the inspector, you receive the report, and you use it to decide whether to proceed, request repairs, or renegotiate. The inspection protects your interests, not the lender.

The report is also the basis for your repair negotiation: a well-documented finding like a roof near end of life or a failing furnace gives you the leverage to request a credit or a price adjustment, which is how a good inspection pays for itself.

The appraisal is for your lender, and it establishes the home market value. A licensed appraiser inspects the property and compares it to recent sales of similar homes to arrive at a value. The lender uses that number to decide how much it will lend.

If the appraisal comes in below your offer, the lender will only lend based on the appraised value, which can trigger renegotiation or require you to cover the difference. The appraisal protects the lender money.

The appraiser walkthrough is a value exercise, not a condition exam: they note obvious items that affect value but do not test systems, check the roof life expectancy, or operate appliances, which is precisely why a clean appraisal says nothing about whether the house is sound.

The buyer orders and pays for the inspection directly, while the lender orders the appraisal and the buyer pays for it, usually at closing. That difference reflects who each report serves: you use the inspection, and the lender uses the appraisal.

Both are routine costs of buying. Inspections typically run a few hundred dollars, and appraisals are usually paid upfront or at closing as part of your costs. Neither should be skipped.

Because the lender orders the appraisal, you cannot shop for the lowest appraisal fee the way you can with an inspector; the fee is set by the lender and may be paid at application or added to closing costs, another small line item worth confirming on your Loan Estimate.