Real Estate: What is a Home Appraisal?


Appraisals are an essential part of buying or selling a house. A property’s market value establishes the price of houses. An appraisal informs a lender that the property sells for the least amount it is lending. The state provided certification is a requirement for appraisers. 

What is an appraisal?

People confuse comparative market analysis and appraisals. A CMA is a report to help clients determine the asking and offering prices that are realistic. Real estate agents utilize comparative market analysis. An appraisal report is the only report a lender looks at when considering a loan.

The same type of confusion happens when learning about home inspections. Appraisals are not the same thing. Appraisers value a home while an inspector checks different systems within houses to ensure there are no problems.

Appraisal Reports on Houses

  • Appraisers produce detailed reports including the on-site evaluations and an assessment of sales data.
  • Details about the house and comparisons to other houses on the market
  • Analysis of the real estate market in a given area
  • Issues an appraiser finds as negatives in terms of property value
  • Dangerous problems with a property that needs addressing
  • Average sale estimate
  • Type of property

The Meaning of an Appraisal

Appraisal Red Flags

  • If houses get appraises for lower than the sales price
  • Time on the market longer than the local average
  • Shared roads, private entrances, and lack of maintenance agreement

Two Common Appraisal Methods

Cost Approach — New houses lean towards the cost approach. The cost of building a house is a known factor. The estimation is how much it costs to replace the structure if destroyed

Sale Comparison Approach — Estimating a property’s market value using comparable properties that are similar.