What does an appraisal estimate?

An appraisal is a professional assessment of a property's value, primarily aimed at determining its fair market value based on various factors. This assessment considers multiple aspects such as the property's location, the condition of the property, recent sales of comparable properties (often referred to as "comps"), and overall market trends. By incorporating a comparative market analysis, appraisals provide a comprehensive evaluation that reflects what a property is worth in the current real estate market.

Choosing an accurate value for a property is crucial for various transactions, including sales, financing, and taxation. Understanding the methodology behind an appraisal is essential for real estate professionals and buyers alike, as it provides an informed basis for making decisions regarding property investments and sales.

In contrast, while the current market competition for similar properties can influence value, it does not in itself provide a complete estimate of a property’s value. Forecasting future sale prices or the costs associated with renovations pertains to different aspects of real estate evaluation and investment strategy. Thus, the correct answer emphasizes a thorough and context-aware valuation that appraisals aim to deliver.