An appraisal of real estate is the valuation of the rights of ownership. Instead of just creating the property value, the appraiser uses market data to derive a value estimate. The appraiser must take the site, amenities and the physical condition of the property into consideration when compiling the report. Before the appraiser can come to a final opinion of value, there must be a good deal of data conducted and collected. He will inspect the property as part of preparing the report.

The need to accurately define the purpose of the appraisal is essential due to the many types of value, such as Fair Market Value, Insurance Value, Tax Value and Value In Use.

Mortgage companies request the majority of real estate appraisals to confirm the property's purchase price for loan purposes. The mortgage company's position is the following:

· It has two sources of repayment: the purchaser's income and the property.

· The responsibility to repay the loan is not based upon the property's value, so the purchaser is obligated to pay the note even if the property value declines to zero.

· The loan may be insured or guaranteed by a government agency.

· The government does not promise to pay the purchaser's debt if the property value is wrong.

· If the loan is greater than 80% of the value, a private mortgage insurer may insure a portion of the loan.

· There is no decrease in risk for the purchaser regardless of the loan-to-value ratio. The investment by the purchaser is the same, a mixture of personal cash and a loan that must be repaid.