Appraisal vs. Inspection: What’s the Difference?
In real estate, the terms appraisal and inspection are often used interchangeably—but they serve very different purposes. Whether you're a lender assessing loan risk or a broker guiding buyers through the home buying process, understanding the distinction between these two services is critical to setting expectations and protecting all parties involved.
What Is an Appraisal?
An appraisal is a professional opinion of a property’s market value, typically conducted by a licensed or certified appraiser. For lenders, it’s a safeguard—ensuring the home’s value supports the amount being borrowed.
Key functions of an appraisal
Determines the fair market value of the home
Required by most lenders before approving a mortgage
Influences loan-to-value (LTV) ratio and final loan amount
Typically ordered by the lender through an AMC or directly via appraisal management software
What it includes
Analysis of comparable sales in the area
Review of the home’s condition and features
Consideration of market trends and location
An appraisal is about protecting the lender’s investment. It's not designed to uncover repair issues or determine if the home is move-in ready.
What Is a Home Inspection?
A home inspection is a comprehensive assessment of a property’s physical condition, carried out by a certified home inspector. It’s typically ordered by the buyer to understand the property’s structural soundness and safety.
Key functions of an inspection
Identifies issues with the home’s structure, systems, and components
Helps buyers understand potential repair or maintenance needs
Often used as a negotiation tool before finalizing a sale
Not required by lenders but highly recommended for buyers
What it includes
Evaluation of plumbing, electrical, HVAC, roof, foundation, and more
Visual inspection of interior and exterior features
A detailed report outlining findings, safety hazards, and recommendations
An inspection is about protecting the buyer’s peace of mind, not determining a home’s market value.
