Appraisal vs Inspection: Key Differences Every Homebuyer Should Know

Key takeaways

• An appraisal determines a home’s fair market value, while an inspection evaluates its condition.
  
• Lenders require appraisals for mortgage approval, but inspections are optional (though highly recommended).
  
• Appraisals protect lenders, while inspections protect buyers.
  
• Both help buyers make more informed, confident decisions when purchasing a home.
  

What is an appraisal?

A home appraisal is an independent estimate of a property’s market value. Licensed appraisers evaluate the home’s size, condition, location, and comparable sales to determine its worth.

• Purpose: Protects the lender by confirming the loan amount does not exceed the property’s value.
  
• Required by: Lenders for all financed purchases.
  
• Cost: Typically $300 to $600, paid by the buyer.
  
• Timing: Ordered after the seller accepts the offer, before closing.
  
• Buyer involvement: Buyers usually do not attend.
  

What is a home inspection?

A home inspection covers a detailed evaluation of the property’s condition. Licensed inspectors assess the structure, systems, and safety of the home, identifying potential issues.

• Purpose: Protects the buyer by uncovering defects or safety concerns.
  
• Required by: Not required by lenders, but strongly recommended.
  
• Cost: Typically $300 to $500, paid by the buyer.
  
• Timing: Scheduled soon after the offer is accepted, usually before the appraisal.
  
• Buyer involvement: Buyers often attend to hear concerns firsthand.
  

Appraisal vs inspection: Side-by-side comparison

Why both matter in the homebuying process

While appraisals and inspections serve different purposes, both are critical:

• An appraisal ensures you are not overpaying for the home and helps the lender protect its investment.
  
• An inspection reveals potential issues, giving you leverage to negotiate repairs or adjust your offer.
  

Skipping an inspection may save money upfront, but it could cost thousands later if hidden issues arise. For more guidance, see our first-time homebuyer tips.

Loan-specific requirements: FHA, VA, USDA

• FHA loans: Require an appraisal, and the appraiser must also flag safety or habitability issues. Learn more in our FHA loans guide.
  
• VA loans: Require an appraisal, and the appraiser may enforce “minimum property requirements.”
  
• USDA loans: Require an appraisal to confirm value.
  

In each case, the appraisal includes a limited inspection, but buyers should still order a full inspection for peace of mind.

Who pays for the appraisal vs. inspection?

In most cases, the buyer pays for both. These costs are typically included in closing. However, buyers may negotiate after a home inspection to have the seller cover repairs.

Cash buyers: Do you need an appraisal and inspection?

If you are buying with cash, a lender will not require an appraisal. Still, ordering one can help you avoid overpaying. An inspection is equally valuable—especially without lender safeguards. Skipping both could expose you to unnecessary risks.

FAQs about appraisals and inspections

Do I need both an appraisal and an inspection?
Yes. While only the appraisal is required by lenders, both protect you from overpaying or buying a home with costly issues.

Which comes first: the appraisal or inspection?
The inspection usually comes first, so buyers can address repairs or withdraw before paying for an appraisal.

What does an appraiser look for versus an inspector?
Appraisers assess market value factors such as location, comparable sales, and square footage. Inspectors focus on structure, systems, and safety.

Do appraisal and inspection happen at the same time?
Not typically. Inspections happen right after the offer is accepted, while appraisals are ordered later by the lender.

What is a major red flag during a home inspection?
Red flags include foundation damage, water issues, roof deterioration, outdated electrical systems, or mold.

What is checked during a home appraisal?
Appraisers evaluate size, layout, lot, location, and condition compared to recent nearby sales.

What hurts an appraisal?
Deferred maintenance, structural damage, or declining neighborhood values can lower an appraisal.

The bottom line

Knowing the difference between an appraisal and an inspection helps you buy with confidence. An appraisal protects the lender, while an inspection protects you. Together, they provide peace of mind during one of life’s biggest purchases. For more insights, read our guide to what to expect on closing day.