Yes indeed, there are some significant differences between a home appraisal and a home inspection. The primary differences are based on who the action or activity is directed to serve.
An appraisal, when focused on the purchase or sale of a home, is done the majority of the time as an opinion of home value (how much your home is worth) for the lender. A lender wants to be certain that the asset they are loaning money on is actually valued at or above the purchase price, they do not want to own over priced property. An appraisal of the home is done prior to a lender granting final approval on a buyer's loan so they can be more confident their investment is a savvy one.
Appraisals are conducted by licensed appraisers who comply with Federally mandated minimum standards. The appraiser takes many factors into consideration when building their home valuation report such as; location, proximity to desirable schools and other public facilities, the size of the lot, the size and condition of the home itself and recent sales prices of comparable properties. Although appraisers are not concerned with the house being clean they do notice signs of neglect such as cracked walls, chipped paint, broken windows, torn carpets, damaged flooring and inoperable appliances.
If an appraisal comes in lower that the originally proposed purchase price, there are some ways the purchase may still go through. The seller can reduce the purchase price, the buyer could make a bigger down payment, or if it’s a question of needed repairs, a separate escrow account can be set up to fund those repairs.
A professional home inspection is done by a licensed home inspector who keys in on the home’s condition with an eye toward both existing and potential future problems. An inspection is primarily intended to protect the prospective buyer from purchasing a home with structural defects and other major problems. The inspector focuses on major issues, such as electrical wiring, plumbing systems and foundation stability which require up-close physical inspection by a knowledgeable person to determine soundness. When inspections reveal items needing repair, buyers may ask sellers to either repair the flaws or to credit them money back so that they can do the fixes themselves.
Both an appraisal and a home inspection provide points of fact, opinion and value that enable informed lending and buying decisions by all parties involved in a home purchase.