Home Appraisal vs Home Inspection, What Each One Covers

After your offer is accepted, two different professionals will probably look at the house: an appraiser and a home inspector. Both visit the property, both produce a report, and both can affect whether the sale goes ahead. That is where the similarity ends. They work for different people, answer different questions, and protect you in different ways. Mixing them up is one of the easier mistakes for a first-time buyer to make.

1. The one-sentence difference

• An appraisal answers: What is this home worth? It is mainly for your lender.
• An inspection answers: What condition is this home in? It is for you.

The CFPB puts it plainly: a home inspection is different from an appraisal, but you generally need both.

2. The appraisal: a value opinion for the loan

2.1. Who orders it

When you borrow to buy a home, the CFPB says your lender generally requires some form of appraisal. In its list of mortgage key terms, the CFPB describes home appraisals as an independent assessment of the property's value, and notes that in most cases the selection of the appraiser and the associated costs are up to your lender.

2.2. Why the lender cares

The lender is about to lend a large sum against the house. The appraisal tells the lender whether the property is worth enough to back the loan. It focuses on value: the home's size, features, and how it compares with similar nearby sales.

2.3. Your right to a copy

Federal rules give you a right to see it. Under Regulation B, section 1002.14, a lender must give you a copy of all appraisals and other written valuations developed for an application secured by a first lien on a dwelling. The copy must be provided promptly when it is completed, or three business days before closing, whichever is earlier. The lender must also tell you in writing about this right within three business days of receiving your application.

The CFPB adds that the copy is free. You can agree to waive the timing and receive the copy at or before closing instead, but you still get it.

Read it when it arrives. Check that the address, square footage, number of bedrooms and bathrooms, and lot size match the home you are buying. Errors in basic facts can affect the value.

3. The inspection: a condition report for you

3.1. Who orders it

You do. The CFPB advises scheduling an inspection as soon as possible after choosing a home, so there is time to resolve problems and to arrange any additional, specialized inspections. It also recommends an independent inspector who is accountable to you. If an inspector is paid by someone else, or not paid until closing, the CFPB warns that problems might be underemphasized.

3.2. What it looks at

An inspection is about the physical home: structure, roof, foundation, systems, and wear. The CFPB's own example of a serious flaw is a cracked foundation, the kind of finding that might make you decide not to buy at all.

3.3. What it does not do

An inspection report does not estimate the home's value. Regulation B's commentary specifically lists reports reflecting property inspections that do not estimate value, and are not used to estimate value, as examples of documents that are not valuations. That is the regulation drawing the same line this article does.

3.4. Check the inspector

The CFPB notes that, depending on where you live, home inspectors may not be required to be licensed. It suggests asking for references from past customers and checking the inspector with your local Better Business Bureau and your state or county licensing authority. It also encourages you to attend the inspection if you can, so you can ask questions and understand the report.

4. Side by side

5. How each one can change your deal

5.1. After an inspection

If repairs are needed, the CFPB says you may want to negotiate with the seller about who makes or pays for them. Depending on your contract and the local market, the seller may or may not agree. If your purchase contract is contingent on a satisfactory inspection, the CFPB says you have the right to cancel the sale without penalty if you are not satisfied with the results.

That contingency only exists if you include it in your offer, which is why timing and contract terms matter.

5.2. After an appraisal

The appraisal can also raise condition issues, especially for loan programs that require the property to meet certain standards. The CFPB explains that an appraisal could say the property is subject to repairs. If major repairs are needed, such as a new roof, the lender can require them to be made before closing, or ask you to put money in a special account to pay for them right after closing.

6. Why you should not skip the inspection

It is tempting to think the appraisal covers you, since a professional is already visiting the house. It does not. The appraisal exists to support the loan decision. It is not a full review of the roof, wiring, plumbing, or foundation for your benefit. The CFPB's advice is direct: do not buy a home without having it thoroughly inspected.

7. Key takeaways

• An appraisal estimates value for your lender; an inspection examines condition for you.
• Your lender usually chooses the appraiser, and you have the right to a free copy of every appraisal.
• The copy must arrive promptly after completion or three business days before closing, whichever is earlier.
• You choose the inspector; pick one who is independent and check licensing and references.
• An inspection contingency in your contract is what lets you cancel without penalty over inspection results.