What is the purpose of an appraisal?

The purpose of an appraisal is to determine the fair market value of a property. This process involves a professional appraisal conducted by a licensed appraiser who analyzes various factors including the property's condition, location, and recent comparable sales in the area. The appraisal provides a reliable estimate of what the property is worth in the current market, which is essential for both buyers and lenders during the mortgage process.

Determining the fair market value is crucial for several reasons: it helps ensure that the buyer is not overpaying, protects the lender from lending more than the property is worth, and aids in proper investment decisions for all parties involved. The outcome of the appraisal can directly impact the mortgage financing, including the approval amount and terms.

While assessing a borrower's financial stability, estimating repair costs, and evaluating neighborhood trends are all important aspects of the real estate process, they do not constitute the primary purpose of an appraisal. These elements are generally considered in other phases of buying or financing a home but do not focus on establishing a property's market value as the appraisal does.