Appraisal or inspection

Both walk the house. Only one is telling you whether to buy it.

An appraisal answers what it is worth. An inspection answers what is wrong with it.

People mix them up, often while deciding which one to skip. On most purchases you want both.

Two professionals outside a residential house, one standing with a clipboard near the front steps and the other crouched examining the foundation wall.

Side by side

Two reports, two questions

The appraiser protects the lender's collateral. The inspector protects you. Those are not the same interest.

Appraisal

What is this property worth?

Ordered by: The lender, usually through an appraisal management company
Paid by: The borrower, on a loan
Who performs it: A state licensed or certified appraiser
Main output: An opinion of market value as of a specific date
Condition: Noted only where it affects value
Required: Yes, on most mortgages
Who gets the report: The lender, with a copy to the borrower

Home inspection

What is wrong with this property?

Ordered by: The buyer, directly
Paid by: The buyer
Who performs it: A home inspector, licensed in many but not all states
Main output: A list of defects, safety issues and remaining service life
Condition: The whole point of the visit
Required: No, it is a choice
Who gets the report: You

Why a buyer usually wants both

An appraisal at or above the contract price tells you the lender's collateral is sound. It tells you almost nothing about the furnace, the roof, the wiring or the drainage. The appraiser is not crawling the roof space or testing outlets. That is not the assignment.

So a fine appraisal is no reason to skip the inspection. The appraisal was never looking for those problems.

Where they touch

Where the two overlap

An appraiser does report condition where it affects value or lender requirements. Visible damage, an unsafe condition, a roof at the end of its life or missing handrails can all show up in an appraisal. On some loan programs they trigger a required repair and a reinspection.

The difference is depth and intent. The appraiser notes condition as it affects value. The inspector goes looking for problems on your behalf and has no view on what the house is worth.

Here is where it bites. A condition issue in the appraisal can hold up your loan. The same issue in the inspection gives you room to negotiate.

Appraisal help

For the valuation half

The inspection is yours to book with whichever inspector you trust. The appraisal normally runs through your lender, but if you need a residential appraisal ordered for another reason, such as a private sale, you can arrange the appraisal side with Pocket Appraisal, a national residential appraisal service.

Questions

Common questions

Do I need both an appraisal and an inspection?

On a financed purchase you will almost certainly get an appraisal, because the lender requires it. The inspection is your choice, and it is the one working for you. One does not replace the other.

Will the appraiser find problems with the house?

Only problems that affect value or that a loan program requires them to flag. They are not testing systems, running appliances or crawling under the house to hunt for defects. Treating an appraisal as a condition report is how people get surprised after closing.

Can the appraisal kill my deal?

It can complicate it. A value below the contract price creates an appraisal gap, and your contract decides what happens next. An appraisal contingency typically lets you renegotiate or walk. On some loan programs, required repairs can also delay closing until they are done and reinspected.

Which one happens first?

Usually the inspection. The inspection period in a purchase contract tends to run early, and the lender orders the appraisal once the loan is moving. That order suits you, since the inspection tells you whether you still want the house.

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