The difference between an appraisal and an inspection is that an appraisal focuses on determining the fair market value of a property, while an inspection evaluates the condition of the home. An appraisal is conducted by a licensed appraiser who compares the home's features, location, and recent sales data to determine its value. This process typically costs around $400. On the other hand, a home inspection is performed by a licensed inspector who thoroughly examines the property's condition and functionality of major systems. A home inspection can cost between $250 and $700.
While appraisals are often required by lenders to ensure the property's value aligns with the loan amount, inspections are not typically mandatory for conventional financing. However, they are highly recommended. FHA or VA loans, on the other hand, usually require inspections.
Cash buyers have the flexibility to choose whether to conduct an appraisal and inspection. Although not mandatory, these evaluations can provide reassurance regarding the purchase price and uncover any potential issues or necessary repairs.
Both appraisals and inspections serve important roles in the homebuying process, offering valuable insights to protect buyers' investments and enable informed decision-making.