A real estate appraisal helps to establish a property’s market value–the likely sales price it would bring if offered in an open and competitive real estate market. Your lender will require an appraisal when you ask to use a home or other real estate as security for a loan, because it wants to make sure that the property will sell for at least the amount of money it is lending. (An appraisal is also not a home inspection report. Appraisers make notations about obvious problems they see, but they are not home inspectors. They do not test appliances, look at the roof, check the chimney or do any other typical home inspection tasks. Never count on an appraisal to help you determine if the home is in good condition.)
Don’t confuse a comparative market analysis, or CMA, with an appraisal. Real estate agents use CMAs to help home sellers determine a realistic asking price. Experienced agents often come very close to an appraisal price with their CMAS, but an appraiser’s report is much more detailed–and is the only valuation report a bank will consider when deciding whether or not to lend the money.