Last Updated on April 1, 2024

What is an Appraisal for Real Estate? | Real Estate Definition

By Alan F Macdonald

What is an Appraisal for Real Estate? | Real Estate Definition

What is an Appraisal for Real Estate?

A real estate appraisal is a calculation of the value of a home. A real estate appraisal can be done through a few different methods and for a few reasons, but the goal is to determine how much a piece of real property is worth.

Real Estate Agent Explains Appraisals

Just as real estate can be used for different things – like personal use, recreation, investing – real estate appraisals are done for many reasons: placing insurance, mortgage verification, home equity lines of credit and investment value (possible future value). However, because all of these methods are done through a mathematical calculation, they cannot necessarily pinpoint the exact value of a property at a particular time. Selling a property on the open market is the only way to determine how much it’s really worth to a buyer.

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    Real estate agents may do a market evaluation which is similar to an appraisal – but it is not an appraisal – and is only done to try to determine a price for the sale of the property. An actual appraisal can only be done by an appraiser. All real estate appraisers must be licensed when working in the province of Alberta and are either members of the Appraisal Institute of Canada or the Canadian National Association of Real Estate Appraisers.

    Why Does It Matter?

    Appraisals are very important to make sure investments are sound, fraud is prevented, and owners and lenders are protected. For example, every time a new mortgage is placed on a property, the lender will have an appraisal done to make sure the value of the property is reasonable. If the appraiser’s findings do not mesh with the purchase price, the lender may not lend the funds to the buyer and the transaction could collapse.