Appraisal

A licensed appraiser's independent estimate of a property's market value, usually ordered by the lender before a loan closes.

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Primary references on this page:

Fannie Mae Selling Guide: cost and income approaches to value

The Appraisal Foundation: Uniform Standards of Professional Appraisal Practice

An appraisal is a formal opinion of a property's value prepared by a licensed appraiser, most often because a lender requires one before funding a loan. For residential rentals the appraiser typically leans on recent sales of comparable properties, adjusting for differences in size, condition, and location; for larger income property the income approach — value derived from net operating income — carries more weight. The lender uses the result to size the loan, since loan-to-value is calculated against the lower of price and appraised value.

An appraisal below the contract price is one of the most common ways a deal wobbles: the buyer must bring more cash, renegotiate, or walk under an appraisal contingency. It is worth remembering what an appraisal is not — it is one professional's estimate on one date, not a guarantee of resale value, and it is distinct from an inspection, which assesses condition rather than worth.

Approaches are selected and reconciled for the assignment

The sales comparison approach analyzes relevant sales and adjustments; the income approach relates supported income to market evidence; and the cost approach considers land plus improvement cost less applicable depreciation. Their relevance depends on property type, intended use, available evidence, scope, and applicable standards. An appraisal does not have to weight every approach equally.

High-level valuation approach questions
Approach	Core evidence	Key limitation
Sales comparison	Comparable transactions and supported adjustments	Comparability and market-date differences
Income	Rent, expenses, vacancy, and market capitalization evidence	Sensitive to normalized income and rate assumptions
Cost	Land, replacement or reproduction cost, and depreciation	Cost may not equal market value

From engagement to reviewable value opinion

A reviewable workflow records the client and intended use, property rights, effective date, scope, property data, inspection extent, market evidence, adjustments, applicable approaches, reconciliation, assumptions, limiting conditions, and final opinion. A challenge should identify a factual error, omitted relevant evidence, unsupported adjustment, or scope inconsistency rather than demand a target value.

A licensed appraisal is a standards-governed assignment by a qualified appraiser. A comparative market analysis is commonly a brokerage market estimate; an automated valuation model applies a statistical or rules-based model; and a broker price opinion is a broker’s opinion under its applicable scope and rules. Availability, permitted use, and regulation vary, so these products are not interchangeable merely because each produces a number.

Editorial ownership

Written and maintained by the Aptoria editorial team

Editorial method reviewed July 28, 2026. Aptoria reviews scope, source fit, examples, limitations, links, and publication gates. This record does not claim attorney, CPA, lender, appraiser, or other independent professional sign-off.

Professional review is not claimed. Verify current law, tax treatment, loan terms, valuation inputs, and property-specific facts with the appropriate qualified professional before acting.

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Primary and authoritative sources

Fannie Mae Selling Guide: cost and income approaches to value ↗

The Appraisal Foundation: Uniform Standards of Professional Appraisal Practice ↗