Let me tell you what the difference between a real estate appraisal and the true market value of a property!
Understanding these differences will save you money when it comes to buying or selling a home, and it will help you appreciate the need and value of a real estate appraisal (even though it might not be necessarily telling you what the home is worth in today's real estate market).
What Is A Real Estate Appraisal?
An appraisal conducted by a professional, licensed real estate appraiser is an opinion of value based upon certain conditions and a specified purpose.
The purpose of the real estate appraisal is seldom to provide the home seller with its current value in today's housing market, so it is important for the reader to consider the purpose of the appraisal if relying on its valuation as part of a decision-making process.
When appraisals cause confusion...
This process of determining the home's value is very different than the process a buyer's bank will use once a contract has been attained, from the selection of the specific appraiser down to the rules and obligations the appraiser will follow, the process and the appraiser's liability are simply not the same. Thus, most appraisals that I have seen performed for and requested by the owner of the property are valued higher than those performed for the purchase of the home by a buyer.
How does this fit in with Replacement Cost?
Replacement cost is the cost necessary to repair or replace your entire home. When you insure your home for its replacement value, your insurer will reimburse you for the cost of rebuilding or repairing your home, based on the size and what the difference is in Values in Real-estate?