Certified Residential Appraiser Practice Exam

What does the term appraisal refer to?

1. The process of estimating property taxes

2. The act of developing an opinion of value

3. An evaluation of property condition

4. A negotiation between buyer and seller

The correct answer is: The act of developing an opinion of value

The term appraisal specifically refers to the act of developing an opinion of value regarding a particular property. This process involves a comprehensive analysis of various factors, such as comparable sales, market trends, property condition, and specific characteristics of the property in question. Appraisers must consider all relevant information to arrive at a well-supported and unbiased value estimate. In contrast, the assessment of property taxes is a different function typically performed by local government assessors to determine the taxable value for taxation purposes. Evaluating property condition pertains more to property inspections or home evaluations rather than establishing market value. Negotiations between buyers and sellers focus on the discussions and agreements related to the price and terms of a sale, rather than the independent appraisal process designed to ascertain a property's fair market value. Thus, "the act of developing an opinion of value" accurately captures the essence of what an appraisal entails.