How is an appraisal defined in real estate?

An appraisal in real estate is defined as an opinion of a property's fair market value based on analysis. This process involves a thorough evaluation conducted by a licensed appraiser, who examines various factors such as the property's condition, location, comparable sales (known as "comps"), and current market trends. The purpose of an appraisal is to establish a value that reflects what a buyer might be willing to pay and what a lender would be willing to finance. This is crucial in various scenarios, including refinancing, purchasing, or selling a property, as it helps to ensure that the price aligns with market standards.

Understanding this definition is essential for real estate professionals because appraisals play a significant role in transactions, influencing negotiations and financing terms. The analysis performed during an appraisal provides a professional objective viewpoint, which helps all parties involved have a clearer understanding of the property's value.