In real estate transactions, what is the primary purpose of an appraisal?

The primary purpose of an appraisal in real estate transactions is to establish the value of a property. An appraisal is typically conducted by a licensed appraiser who assesses various factors including the property’s condition, location, recent sales of comparable properties, and overall market trends. The resulting appraised value serves important functions, such as determining a fair market price for buying or selling a property and influencing loan amounts for financing purposes.

Established property value is crucial in negotiations and can affect the buyer's offer and the seller's expectations. While appraisals may involve an inspection of the property, the central aim remains to determine its worth in the context of the current market. The establishment of value is what provides a foundational understanding necessary for various decisions in the real estate transaction process. Understanding this helps stakeholders make informed choices regarding pricing, financing, and investment.