What Is an Appraisal?

What Is an Appraisal? The Appraiser’s Definition

If you’re exploring new career opportunities and have looked at becoming a real estate appraiser, one of the first questions you may have is, “What is an appraisal?”

The meaning of appraisal is the estimation of a property’s value, completed by a professional. This is the broadest definition. If you want to be a property appraiser, you need a bit more information than that, so let’s take a closer look.


In this article, you’ll find answers to the following questions and more:

  • What is an appraisal?
  • What is an appraisal inspection?
  • What is an appraisal report?
  • What should customers know about the appraisal process?
  • When is an appraisal needed?
  • What is a commercial appraisal?
  • How much does an appraisal cost?
  • What is a VA appraisal?
  • What is an FHA appraisal?

What is an appraisal?

An appraisal refers to the process of determining something’s value—a car, a ring, or (in this case) a piece of real estate.

A licensed appraiser performs an independent, unbiased valuation to determine the current market value of a property, such as a single-family home, farm, or business. They then communicate their findings in a document called an appraisal report.

Thus, the meaning of appraisal refers to both the process by which an appraiser determines a home’s current worth, and the document they produce to communicate and support their professional opinion.

What is an appraiser?

An appraiser determines the value of a property by using on-site observations, existing property data, and information related to comparable property. While an appraiser commonly provides this information for mortgage lenders, appraisals are also needed during estate planning, divorce settlements, and cases related to eminent domain.

The appraisal inspection and market research

To create a fair, accurate appraisal, an appraiser will typically complete an in-person visual inspection of the property, looking at elements such as:

  • The square footage of the house or business as well as the size of the property
  • How many and the types of rooms in the property (such as bedrooms and bathrooms)
  • Building materials, including the type of roofing and exterior cladding along with interior materials like flooring and walls
  • Age of the home
  • Amenities of the property, such as a pool, finished basement, or a patio
  • Improvements or updates that can improve the functionality of the home
  • Property elements, such as a fence, outbuildings, or a pond
  • Structural soundness, such as the presence of mold or water damage

However, the property data alone isn’t enough to determine the fair market value of the property. An appraiser must also perform market research. They look at the location of the property, analyze public records, and research comparable homes in the area that recently sold in order to produce a credible opinion of value.

The appraisal report

Once they have all this information, the appraiser will create a comprehensive appraisal report that supports their estimation of the market value of the property.

An appraisal report will typically include:

  • The final appraisal form
  • The appraiser’s estimation of the property’s current market value
  • Photos of the property and immediate surroundings
  • MLS listings and photos of comparable properties
  • An explanation of how the square footage was calculated
  • A sketch of the exterior of the building
  • A map of the property’s location with regard to other properties used for comparison
  • Other relevant data used in the appraisal process, such as public land record, tax records, market sales data, etc.

A real estate appraisal goes a long way toward assuring a prospective homebuyer and their lender that the agreed-upon price for a property is fair. In most counties, a home appraisal is mandatory in order to determine property taxes.

Home appraisal vs. home inspection

These two terms may seem similar, but they refer to different processes. A home inspection requires an inspector to look specifically for problems in the home and assess which parts of the home need maintenance. An inspection can include testing the outlets, taking a look at the roof, or running the furnace to see if everything has been installed correctly.

A home appraiser, on the other hand, is not out to find problems—although they will certainly take note of visible defects. An appraiser in only interested in determining the fair market value of the piece of real estate, without looking for deeper issues in the home which may impact how much a homebuyer will spend on repairs.

5 things customers should know about the appraisal process

In addition to understanding the difference between an appraisal vs. home inspection, there are several common misconceptions about appraisals. To help clarify things for consumers, we asked our community of real estate appraisers, “What’s one thing you wish customers understood about the appraisal process?” Here’s what they said:

What's one thing you wish customers understood about the appraisal process?

1. Appraisers do not assign value, they produce a credible opinion of value (23%)

“The data tells the story, an appraiser just explains it.”

2. The appraisal process is complex and takes time (17%)

“The homeowner thinks that the 35 minutes you spend at the home is all the appraiser does.”

“The market value is an opinion as of a specific date (the effective date).”

3. Appraisers are unbiased and must follow guidelines and regulations (17%)

“We must follow the rules set forth to us by FNMA.”

4. How renovations and upgrades affect value (17%)

“Just because they put a certain dollar amount into their home, doesn’t mean that the home value gets boosted by that dollar amount.”

5. How to prepare for the appraisal appointment (3%)

“Especially [for] FHA [appraisals], that we need to check to ensure at least one window in each bedroom opens, appliances are in good working order, heat is in good working order, there is a drainpipe on the water heater, all toilets flush, hot water to all faucets, and now smoke detectors and carbon monoxide detectors. Too many things that could cut off having to go back to the property for a final [inspection].”

Other things to know about the appraisal process

About 23% of survey participants selected “Other” and wrote in their own responses to the question, “What’s one thing you wish customers understood about the appraisal process?” Their answers included the following:

  • “Cost does not equal value.”
  • “That everything is relevant to value.”
  • “The appraiser cannot provide their opinion of value immediately after the inspection is completed.”

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When is an appraisal needed?

Typically, a lender, such as a bank or mortgage company, will require an appraisal prior to finalizing a property loan. The lender wants to confirm the value of the property because they don’t want to loan more money than the home is worth. This ensures that if they have to foreclose on the property, they can sell it to recover the lost revenue.

This isn’t just for new home loans. An appraisal is also required for refinance loans and home equity lines of credit (HELOC). No matter the reason for refinancing, the lender will require an appraisal.

Other reasons a property appraisal may be needed include divorce and estate valuations. When a couple separates, they may need to have the house appraised so one spouse can buy out the other’s share or so they know how much to sell the property for.

After a property owner passes away, an appraisal determines the value of the property to split between heirs or to put on the market to pay off debt.

What is a commercial appraisal?

A commercial appraisal is basically the same as a residential appraisal for a single-family home. But it’s an estimate of the market value of a commercial property, such as a retail store, apartment building, industrial facility, or restaurant. A commercial appraisal is performed by a Certified General Appraiser.

When performing a commercial real estate appraisal, the appraiser goes beyond looking at the building itself and analyzing similar properties. They also assess key factors such as utility, need, scarcity, and effective purchasing power to determine the market value.

Frequently asked questions about home appraisals

In addition to “What is an appraisal?” homebuyers and current homeowners often have questions about different types of appraisals and the role it plays in the homebuying process. Let’s explore some common questions about home appraisals.

How much does an appraisal cost?

The average cost of a home appraisal is around $500, according to the National National Association of Realtors 2023 Appraisal Survey. However, the cost may vary depending on factors like property size and location. Most people can expect to pay $400–$700 for a home appraisal.

What is a VA appraisal?

A VA appraisal is an appraisal performed on a property that’s being purchased with a VA home loan, which is a loan backed by the Department of Veterans Affairs. It must be performed by a VA appraiser, whose job is to estimate the property value and ensure the home meets the VA’s minimum property requirements.

What is an FHA appraisal?

An FHA appraisal is a home appraisal performed an a property purchased with a Federal Housing Administration (FHA) loan. These loans are common for first-time homebuyers because they are easier to qualify for and require a lower down payment compared to conventional home loans.

FHA appraisals are performed by appraisers who are listed on the official FHA appraiser roster. They must have in-depth knowledge of current policies and procedures for conducting FHA appraisals.

Learn more about becoming an appraiser

Now that you know a little more about the definition of appraisal and how it’s performed, it’s time to look at whether this career path is right for you. Explore our free guide, “Is an Appraisal Career Right for You?” The guide includes helpful information about average earnings, what kind of education you’ll need, what the work itself entails, and how to get started on your journey to becoming a real estate appraiser.

Editor’s note: This post was originally published on March 13, 2018 and updated on March 28, 2024.