A home appraisal’s main purpose is to develop an opinion of property value for a defined use and effective date. It supplies a reference supported by property and market evidence.
Core purposes
Provide an independent opinion of value that reflects the home’s condition, location, and recent comparable sales, rather than just the agreed purchase price.Help the mortgage lender confirm the property is sufficient collateral for the loan amount, reducing the risk of loss if the borrower defaults.Give buyers and sellers a reference point for negotiating a fair price and deciding whether to move forward with the transaction.When an appraisal is used
During a financed purchase, ask the lender which valuation process and ordering requirements apply.During a refinance, an appraisal is used to check current market value, which affects how much can be borrowed and the loan terms.Before listing a home, some owners order an appraisal to help set a realistic asking price and support pricing decisions in changing markets.What the appraiser looks at
Physical characteristics such as size, layout, age, condition, and any upgrades or amenities like remodeled kitchens or added rooms.External factors including neighborhood, lot size, zoning, location, and recent sale prices of similar nearby homes (comps).Market conditions such as local supply and demand, price trends, and any factors that might positively or negatively affect value.Appraisal vs. inspection
An appraisal focuses on the home’s value for the intended use identified in the assignment.An inspection focuses on the home’s condition and safety, identifying defects or needed repairs for the buyer’s decision-making, not for setting market value.