What is the primary purpose of an appraisal in real estate?

The primary purpose of an appraisal in real estate is to estimate the market value of a property. Appraisers analyze various factors, including the property's condition, location, and comparable sales in the area to determine its value in the current market. This estimate is crucial for various stakeholders, such as buyers, sellers, lenders, and investors, as it helps ensure that they are making informed decisions based on an accurate understanding of what a property is worth.

While legal descriptions of the property are important for real estate transactions and are included in various documents, they do not reflect the property's current market value. Similarly, property tax assessments are performed by tax authorities and are used to determine tax obligations, but they are distinct from the purpose of an appraisal. Evaluating property insurance coverage involves determining the value necessary to adequately insure the property but does not reflect an independent market value assessment conducted by appraisers.

Understanding the primary goal of an appraisal helps to clarify its role in the real estate process and why it is essential for financial decision-making.