What Is The Meaning Of Appraisal In Real Estate?

What the opinion addresses

The appraiser analyzes property and market information to develop an opinion of value. The report explains the evidence and reasoning used.

The property, the market and the location

Property analysis considers size, condition, floor plan and features. For an assignment with a property visit, the observations help describe the home. The work depends on the agreed scope.

Market research examines relevant comparable sales, market trends, supply and demand. The evidence needs to relate to the type of property and the effective valuation date.

Location matters because otherwise similar homes can compete in different markets. The surrounding area, site characteristics and relevant amenities add context to the comparisons.

Why an appraisal may be requested

Mortgage lending: A lender may request an appraisal as part of evaluating property offered as collateral. Confirm its ordering and report requirements.

Purchase and sale transactions: An appraisal can inform pricing and negotiations. It does not guarantee a sale price or prevent every unfavorable purchase decision.

Refinancing: When homeowners refinance their mortgages, lenders typically require new appraisals to account for changes in the property's value or market conditions.

Read the scope and effective date

An appraisal is a reasoned opinion, not an exact prediction of an eventual sale. Read its scope and effective date to understand what it addresses.