There is also such things as future appraisals. It is essentially the same thing, but the value takes into account improvements to be made. This is most often used for construction and rehab loans.

Do not confuse an appraisal with a home inspection. An appraisal helps determine the value of a property while a home inspection will reveal areas where the home may need repairs.

In some cases a lender or bank will do what is called an Automated Valuation Model or an AVM. It's a computer generated appraisal report. This type of report normally works well with property's that have a good amount of equity and are considered a low risk loan to the lender or bank.

Why you need an appraisal
Every year, countless people in the United States buy, sell or refinance their own slice of the American Dream. Most, if not all, of these transactions include a simple line item for an appraisal. It has become an understood and accepted part of a real estate transaction. ''Let's bring in the expert and make sure we're not spending too much on this property.''

But is this the only reason to get an appraisal? Are there other times when the services of a certified, licensed, independent, and unbiased real estate professional might come in handy?
• PMI Removal

Private Mortgage Insurance or PMI is the supplemental insurance that many lenders ask home buyers to purchase when the amount being loaned is more than 80% of the value of the home. Very often, this additional payment is folded into the monthly mortgage payment and is quickly forgotten. This is unfortunate because PMI becomes unnecessary when the remaining balance of the loan - whether through market appreciation or principal paydown - dips below this 80% level. In fact, the United States Congress passed a law in 1998 (the Homeowners Protection Act of 1998) that requires lenders to remove the PMI payments when the loan-to-value ratio conditions have been met. Many appraisers offer a specific service for home owners that believe they have met the 80% loan-to-value metric. The costs of these services are very often recovered in just a few months of not paying the PMI.

• Pre-Sale Decisions

Before someone decides to sell a home, there are several decisions to be made. First and foremost: ''How much should it sell for?'' But first there may be other equally important questions to ask: ''Would it be better to paint the entire house first?'' ''Should I put in that third bathroom?'' ''Should I complete my kitchen remodel?'' Many things which we do to our houses have an effect on their value. Unfortunately, not all of them have an equal effect. While a kitchen remodel may improve the appeal of a home, it may not add nearly enough to the value to justify the expense. Appraisers can step in and help make these decisions. Unlike a Realtor, an appraiser has no vested interest in what amount the house sells for. His fee is based on his efforts, not a percentage of the sales price. So seeking a professional appraisal can often help homeowners make the best decisions on investing in their homes and setting a fair sales price.
• Estate Planning, Liquidation or Divorce

The loss of a loved one is a difficult time in life. Likewise, a divorce can be a particularly traumatic experience. Sadly, these events are often complicated by difficult decisions regarding the disposition of an estate. Unlike many wealthy individuals, the majority of Americans do not have dedicated estate planners or executors to handle these issues. Also, in most cases, a home or other real property makes up a disproportionate share of the total estate value. Here too, an appraiser can help. Often the first step in fairly disposing of an estate is to understand its market value. Where property is involved, the appraiser can help determine the market value. At this point, equitable arrangements can more easily be arrived at among disputing parties. Everyone walks away knowing they've received a fair deal. There are other uses for real estate appraisals. The highly-trained individuals behind these services are always looking for ways to put their expertise to work for home owners and the people who support them.

What is an appraisal?

An appraisal is a thought process leading to an opinion of value. This opinion or estimate is arrived at through a formal process that typically uses the three ''common approaches to value''. They are the Cost Approach - which is what it would cost to replace the improvements, less physical deterioration and other factors, plus the land value. There is the Sales Comparison Approach - which involves making a comparison to other similar, nearby properties which have recently sold. The Sales Comparison Approach is normally the most accurate and best indicator of value for a residential property. The third approach is the Income Approach, which is of most importance in appraising income producing properties - it involves estimating what an investor would pay based on the income produced by the property.

There are different types of appraisals that can b done on your home. Your mortgage professional will ake care of ordering the correct appraisal that is needed to close your loan.