What is 'Appraisal'
An appraisal is a valuation of property, such as real estate, a business or an antique, by the estimate of an authorized person. To make a valid appraisal, the authorized person must have a designation from a regulatory body governing the jurisdiction of the appraiser. Appraisals are typically used for taxation purposes or to determine a possible selling price for the property in question. The appraiser can use any number of valuation methods to determine the appropriate value to assign, including the current market value of similar properties, quality of the property and valuation models.
BREAKING DOWN 'Appraisal'
In real estate transactions, appraisals help lenders determine the value of properties they are being asked to finance. If a real estate appraisal comes in below the amount of the purchase price or at an amount outside of the required LTV, lenders are likely to decline to fund the deal. Unless the prospective buyer or owner is willing and able to come up with the difference between the appraised value and the lender's financing offer, the transaction will not go forward.