What is an appraisal?

An appraisal refers to the process of determining the current market value of a property. This estimate is often performed by a qualified appraiser who analyzes various factors, including the property's condition, location, and comparable sales in the area, to arrive at an estimated value. An appraisal is crucial in real estate transactions as it helps buyers and sellers understand the property's worth and ensures that lenders do not lend more than the property is worth, thereby mitigating financial risk.

The other options do not accurately describe an appraisal. A legal document for ownership transfer pertains more to deeds, while a payment made to the lender typically refers to loan payments or fees associated with borrowing. A type of insurance policy relates to protection against specific risks, which is distinctly different from the valuation process that an appraisal represents.