What is the purpose of a real estate appraisal?

The purpose of a real estate appraisal is primarily to determine the fair market value of a property. Appraisals are conducted by licensed professionals who assess various factors such as the property’s location, size, condition, and comparable sales in the area. This process is essential in various scenarios, including buying or selling a home, refinancing a mortgage, or obtaining a property for investment purposes.

A well-conducted appraisal ensures that all stakeholders—including buyers, sellers, and lenders—understand the property's value in the current market, which is critical for making informed financial decisions. Knowing the fair market value helps in negotiations and ensures that buyers do not overpay and that sellers price their properties competitively.

While other aspects such as property tax estimation, condition inspection, and investment profitability evaluation are important in real estate, they either derive from the valuation established by an appraisal or serve different purposes altogether. For instance, while understanding the property’s condition is necessary for an appraisal, it is not the primary goal of the appraisal itself. Similarly, property tax assessments may use appraisal information but are not the appraiser's main objective. Thus, the focus of an appraisal on establishing fair market value is what makes it central to real estate transactions.