Appraisal refers to the formal and systematic process of estimating the value of a property, typically performed by a licensed and certified professional known as an appraiser. The objective of an appraisal is to determine a property’s market value or the most probable price that the property would sell for in a competitive and open market.
The appraisal process considers a number of factors, including but not limited to:
- The property’s physical characteristics, such as size, age, condition, and location.
- Comparable properties that have recently sold in the same area (comps).
- The income that the property could generate if rented out (for income-producing properties).
- The current condition of the real estate market.
Real estate appraisals are commonly used in various situations such as in buying or selling transactions, mortgage lending purposes, property insurance, taxation, and investment analysis. For investors specifically, appraisals can help to ascertain the profitability of an investment property and to make informed decisions regarding the purchase, sale, or rental of properties.