appraisal inspection

Appraisal Vs. Inspection: How They Differ

If you’re considering becoming an appraiser or debating between home inspector and appraiser, you may have questions about how the roles differ. Or maybe you want to know which career path is the better option. To help clear up any confusion and answer those questions, we’re providing an in-depth look at appraisal vs. inspection, from defining the processes to comparing income for appraisers and home inspectors.

Summary: Learn the differences between two important jobs in real estate: appraisers and home inspectors. Appraisers determine the value of properties through property observations and comparison analysis, while home inspectors check properties for code violations, safety concerns, and wear and tear.  Both roles are crucial for buyers, sellers, and lenders in making informed decisions. While appraisers generally earn more and can advance through certifications, home inspectors have a more hands-on job with some risks involved. Both careers offer flexibility and opportunities for those interested in real estate.

Appraisal vs. inspection: What are they?

Before we discuss the differences between a real estate appraisal and property inspection, let’s level-set with definitions.

What is a real estate appraisal?

A real estate appraisal is a professional assessment of a property’s value by an experienced, licensed appraiser. Appraisers analyze numerous factors, including information about the property itself, like size, condition, and amenities, as well as location, comparable sales, and market trends. Using this information, they provide an estimation of the property’s market value. This valuation is necessary for buyers, sellers, lenders, and investors to make informed decisions about real estate transactions.

Mortgage companies require appraisals to ensure the property is worth the requested loan amount and to protect them from lending more money than the property’s value, reducing the risk of loss in case of default. Also, appraisals help ensure fair and accurate lending practices while safeguarding both the borrower and the lender.

What is a home inspection?

A home inspection is a comprehensive look at a property’s condition conducted by a certified home inspector. The inspection includes the property’s structural elements, like the roof and foundation, and components like the electrical system, plumbing, and HVAC. It provides information about safety issues, code violations, potential risks, and the functionality of major elements of the home. Home inspection reports also include notes on the severity of any situation, how to minimize risk, and any recommendations for repairs.

A homebuyer requests the inspection, which is often optional, depending on the type of mortgage. The inspection report tells the homebuyer of any issues with the property, and they can use it to renegotiate the terms of the sale or walk away from the mortgage entirely.

Home inspector vs appraiser: Understanding the professions

Now that we understand the scope of appraisals and inspections, let’s look at the professionals who complete them. Home inspectors and real estate appraisers bring experience, knowledge, and impartiality to real estate transactions, but their roles in the process are very different.

What does a property appraiser do?

An appraiser has the experience, skill, and knowledge to research and analyze a property and provide comprehensive, unbiased, and independent findings in an appraisal report about the property’s fair market value.

To do this, an appraiser must visit the property to examine elements that determine a property’s value. This includes:

  • The size of the entire property and the square footage of the home
  • Condition of the property and quality of materials used in structural elements
  • Features, amenities, and renovations or updates, such as solar panels, a swimming pool, or a renovated kitchen
  • Outdoor elements, like outbuildings

The physical property observations are only a portion of what an appraiser does. They also need to research and analyze other data and details to inform their report, including:

  • Finding comparable properties that sold recently in the area
  • Watching real estate trends in the area
  • Verifying legal and public records related to the property

Appraisers can also provide property valuations outside of requests from lenders and buyers. Their expertise is often requested in divorce settlements, estate planning, eminent domain and land condemnation cases, and other legal proceedings. Appraisers may also be needed to review existing appraisals to cross-check the report or verify the information initially submitted.

What does a home inspector do?

A home inspector’s main focus is to accurately report any issues with the functionality or safety of a property. They must go beyond observation and inspect, test, or verify the condition and functionality of the property. This may include:

  • Testing the lights and HVAC
  • Checking for signs of termites
  • Going up on the roof to look for soft areas or places where water may get in
  • Reporting conditions of plumbing and electrical systems
  • Detailing the safety of all exterior areas

Home inspectors provide determinations on the function as well as the presentation of a property; however, aside from recommendations on how to reduce risk or repair a problem, they are less likely to provide their opinions in their reports than appraisers.

Which comes first: Appraisal or home inspection?

A home buyer will request an inspection before the mortgage company schedules an appraisal. This is because the Inspection could turn up issues that may cause the buyer to either negotiate the selling price or step away from the purchase completely. Once they have agreed to the selling price after the Inspection, the mortgage lender assigns a third-party appraiser to determine the value and if the selling price aligns with it.

Can a home appraisal substitute an inspection?

The short answer: No. Before approving a mortgage, the lender will almost always require an appraisal. On the other hand, an inspection is recommended, but not always needed by the buyer. Not only do they have different goals, but the appraisal doesn’t list code violations, the need for repair (unless it affects the value of the property) and issues that could spell trouble for the buyer in the future.

Appraisers vs inspectors: More alike than different?

Appraisers estimate a property’s market value, while home inspectors test and determine its condition; however, their roles are similar. 

Both home inspectors and appraisers are unbiased third parties needed to assess or evaluate properties, and their findings play a necessary role in fair real estate negotiations and transactions. While mortgage lenders are more likely to use an appraisal report to determine the amount they’re willing to lend on a property, buyers can use the appraisal and inspection report to negotiate a fair price or gain more insights into the property.

Home inspectors and appraisers need specialized knowledge about real estate laws, regulations, and professional standards to provide accurate information in a detailed report. While mortgage lenders are more likely to use an appraisal report to determine the amount they’re willing to lend on a property, buyers can use the appraisal and inspection report to negotiate a fair price or gain more insights into the property.

Appraiser vs Inspector: Choosing the right career

Now that you know more about each profession, let’s look at which is the better option! 

Necessary skills

An appraiser will need the following skills to succeed:

  • Financial and numeric literacy: Appraisers compile and analyze extensive numerical data, from price trends to calculating square footage.
  • Tech prowess: Appraisers use a variety of tools and software to complete their jobs, and leveraging new tech will help you keep up with competitors, manage your business more effectively, and help you succeed.
  • Self-motivation: Appraisers are self-employed or own their own business, so you’ll need to be driven to not only get the work done accurately and efficiently, but you’ll also need to seek out new clients and manage business operations.
  • Time management: Appraisers sometimes operate under tight time constraints. For example, a project may need the appraisal expedited to respond to a potential buyer’s offer. 
  • Critical thinking: Appraisers must accurately analyze and interpret data from multiple sources to ensure their reports are cohesive and credible. 

Necessary skills for inspectors:

  • Technical knowledge: Home inspectors will need to learn more about systems and components within a property. 
  • Attention to detail: A home inspector needs to notice even minor defects or irregularities. This includes identifying signs of water damage, structural issues, or safety hazards.
  • Physical stamina: Sometimes inspecting a home requires you to climb ladders, spend several hours on your feet, fit into tight spaces, and interact with electrical systems

Both professions require integrity, strong communication skills, and customer service skills to provide the best experience to clients and ensure accuracy and success.

Growth opportunities

An appraiser may develop in their field by updating their licenses and certifications to appraise different types of properties. To obtain each level of certification, an appraiser will need to complete more qualifying education and experience, but doing so can lead to increased opportunities and income. more education The typical path of an appraiser, depending on state regulations, starts as a trainee, then you can choose a licensing or certification level: 

  • Licensed Residential Appraiser:  1-4 residential units with complexity and transaction value restrictions
  • Certified Residential Appraiser: appraising 1-4 residential units of any complexity or transaction value
  • Certified General Appraiser: appraising all types of residential and commercial properties 

Once you are no longer a trainee, you can start your own business or work with Appraisal Management Companies.

Home inspectors may also choose different certifications from the International Association of Certified Home Inspectors (InterNACHI), including a Certified Residential Property Inspector, Certfied Professional Inspector, and Home Energy Auditor.

Safety on the job

Appraisers often visit properties alone, sometimes in unfamiliar areas, so being mindful of surroundings is essential. Properties may contain hazardous materials, dangerous animals or structural issues. However, appraisers don’t have to test electrical systems, HVACs, or crawl under properties which makes it a safer option, generally. 

Home inspectors should also be aware of these risks associated with visiting a property; however, because an inspector’s job is to interact with the property by testing different structural systems, the risks of injury increase. Because of this, most states require general liability insurance to practice home inspection.

Average Income

According to the 2023 Appraisal Salary Guide, appraisers earn an average of $102,620. Breaking it down by licensing and certification provides a bit more insight:  

  • Licensed Residential Appraisers: $89,056
  • Certified Residential Appraisers: 101,598
  • Certified General Appraiser: $145,094

The average salary will also vary based on factors like location, amount of experience, education level, how many hours worked per week, and property type.

According to the US Bureau of Labor Statistics, home inspectors earn an average of $64,480¹. 

Work – life balance

Appraisers and home inspectors can work independently, building their own businesses and working directly with their clients, lenders or homebuyers, respectively. Appraisers can also work with Appraisal Management Companies (AMCs) and receive work from them while they’re still independent while inspectors can join a home inspection company.

Depending on market demand, either profession offers flexibility, allowing you to schedule jobs when and as often as needed.

Learn if an appraisal career is right for you

If you are exploring career options, download our free ebook “Is an Appraisal Career Right for You?” You’ll learn more about how to become an appraiser, what the day-to-day job entails, and so much more.