Understanding the fundamentals of real estate appraisals
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.
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.
When refinancing, an appraisal determines your current home equity and helps lenders assess risk for the new loan.
Appraisals provide buyers confidence that they're paying fair market value and help sellers price their properties appropriately.
Appraisals are often required for estate settlements, divorce proceedings, and property tax disputes to establish fair market value.
Real estate investors use appraisals to make informed decisions about acquisitions, dispositions, and portfolio management.
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.
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.
An exterior-only inspection combined with comparable sales analysis. The appraiser evaluates the property's exterior and neighborhood but does not enter the home.
| Type | Performed By | Purpose |
|---|---|---|
| Formal Appraisal | Licensed/Certified Appraiser | Lending, legal, official purposes |
| CMA | Real Estate Agent | Listing price guidance |
| Online Estimate | Automated Algorithm | General reference only |
| Tax Assessment | County Assessor | Property tax calculation |
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