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What is an Appraisal?
Understanding the fundamentals of real estate appraisals
Definition
A real estate appraisal is an unbiased professional opinion of a property's market value. It's a comprehensive evaluation performed by a licensed, certified appraiser who analyzes the property's characteristics, condition, location, and comparable sales to determine what a property would likely sell for in the current market.
Unlike online estimates or comparative market analyses (CMAs) provided by real estate agents, a formal appraisal is conducted by a state-licensed professional who follows strict industry standards and guidelines.
Why Are Appraisals Needed?
Mortgage Lending
Lenders require appraisals to ensure they're not lending more money than a property is worth. This protects both the lender and the borrower from over-paying for a property.
Refinancing
When refinancing, an appraisal determines your current home equity and helps lenders assess risk for the new loan.
Home Buying and Selling
Appraisals provide buyers confidence that they're paying fair market value and help sellers price their properties appropriately.
Estate Planning and Tax Purposes
Appraisals are often required for estate settlements, divorce proceedings, and property tax disputes to establish fair market value.
Investment Decisions
Real estate investors use appraisals to make informed decisions about acquisitions, dispositions, and portfolio management.
Key Points to Remember
- Appraisals are independent and unbiased valuations performed by licensed professionals
- They protect all parties in a real estate transaction from overpaying or overlending
- Appraisals follow strict industry standards and ethical guidelines
- The appraised value may differ from the purchase price, tax assessment, or online estimates
- Appraisers are bound by the Uniform Standards of Professional Appraisal Practice (USPAP)
Types of Residential Appraisals
Full Appraisal (USPAP Compliant)
The most comprehensive type, including an interior and exterior inspection, detailed analysis of comparable sales, and a complete written report. This is the standard for most mortgage transactions.
Desktop Appraisal
A valuation performed without a physical property inspection, relying on public records, photos, and comparable sales data. Often used for refinancing when recent appraisals exist.
Drive-by Appraisal
An exterior-only inspection combined with comparable sales analysis. The appraiser evaluates the property's exterior and neighborhood but does not enter the home.
What Do Appraisers Evaluate?
Property Characteristics
- Square footage and layout
- Number of bedrooms and bathrooms
- Lot size and property type
- Age and condition
- Quality of construction
Market Factors
- Recent comparable sales
- Location and neighborhood
- Market trends and conditions
- School districts and amenities
- Economic factors affecting value
Appraisal vs. Other Property Valuations
| Type | Performed By | Purpose |
| Formal Appraisal | Licensed/Certified Appraiser | Assess physical condition |
| CMA | Real Estate Agent | Listing price guidance |
| Online Estimate | Automated Algorithm | General reference only |
| Tax Assessment | County Assessor | Property tax calculation |
Related Resources
The Appraisal Process
A step-by-step guide through the appraisal process from order to delivery of your completed report.
Learn More
Preparing for Your Appraisal
Tips and best practices to prepare your property for the appraisal inspection and ensure an accurate valuation.
Learn MoreNeed a Residential Appraisal?
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