Appraisal vs. Home Inspection: What’s the Difference?

An appraisal and a home inspection are two different things. The appraisal is an opinion of your home’s value, done by a licensed appraiser for the lender. A home inspection is a separate check of the home’s condition and systems. One protects the lender’s collateral, the other protects you as the buyer. Here is how the appraisal works, and why it is not an inspection.

Reviewed by Glenn Groves, Mortgage Broker, NMLS #1124642. GTG Financial, Inc. NMLS #1595076. Serving Santa Rosa and Sonoma County, CA.

What a home appraisal actually is

The appraisal is there to determine the value of the home you are buying. It is really the only time the lender gets eyes on the collateral they are lending against. At the end of the day it is an opinion of value, and it has to be done by a licensed appraiser, ordered through the lender’s appraisal management company.

How is that value formed? The appraiser measures square footage and looks at the overall condition of the property, then does a lot of the work afterward, checking comparable sales and other market factors.

“It’s an opinion of value, but this has to be done by a licensed appraiser.”

Glenn Groves, GTG Financial

Appraisal vs. home inspection: the key difference

This is the mix-up we clear up most often. An appraisal is not a home inspection. The appraiser is not checking every outlet, and your dad does not need to argue with anybody about the water heater. The appraisal is about value for the lender. A home inspection, which is a separate step you arrange as the buyer, is about the condition of the home and its systems.

So you will often deal with both, but they answer completely different questions: one is what the home is worth, the other is what shape it is in.

“This is not a home inspection. They’re not checking every outlet.”

Glenn Groves, GTG Financial

	Appraisal	Home inspection
Purpose	Determine the home’s value	Assess the home’s condition
Who it’s for	The lender	You, the buyer
Who orders it	The lender’s AMC	You arrange it
What they look at	Square footage, condition, comps	Systems, outlets, repairs

The three ways an appraisal can go

Once we can order it, an appraisal generally goes one of three ways. First is an appraisal waiver, also called a property inspection waiver, issued through automated underwriting and verified by the lender. We love these because they save the borrower money and time.

Second is an automated valuation model, used mostly for products like a home equity line of credit. Third is a standard, full appraisal, where the appraiser visits the property for 25 to 30 minutes, measures, and then completes the valuation back at the office.

Where the appraisal fits in your loan roadmap

The appraisal is Stage 8 of the loan roadmap, after your disclosures are signed and before underwriting and clear to close. See the full GTG loan roadmap to know every step before it happens.

Whether you are buying in Santa Rosa, Sonoma County, or anywhere in California, knowing the difference between an appraisal and an inspection helps you plan both with confidence. When you are ready, you can get pre-qualified online. For a neutral overview, the CFPB’s explainer on home appraisals is a helpful resource.

Ready to move forward with a lender who explains every step? Talk with Glenn or request a quote.

Frequently asked questions

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

An appraisal is an opinion of the home’s value, done by a licensed appraiser for the lender. A home inspection is a separate check of the home’s condition and systems that you arrange as the buyer. They serve different purposes.

Who orders and pays for the appraisal?

The appraisal is ordered through the lender’s appraisal management company, not by your broker. You typically pay for it through a link once you have signed your initial disclosures.

Do I need to be at the appraisal?

On a purchase you generally do not need to be there. The appraiser measures and reviews the property, then completes the valuation using comparable sales and market data afterward.

What happens if the appraisal comes in low?

A low value does not automatically kill the deal. We can renegotiate with the seller or restructure the loan, for example adjusting your down payment. It usually means we regroup, not that the purchase is over.

Glenn Groves NMLS #1124642 / GTG Financial, Inc. NMLS #1595076 / Equal Housing Opportunity / Not a commitment to lend / CA DRE #02029711. Loan terms and pricing vary by borrower and situation. nmlsconsumeraccess.org