What role does an appraisal play in real estate transactions?

An appraisal plays a critical role in real estate transactions by determining the fair market value of a property. This value is based on various factors, including comparable sales in the area, the condition of the property, and current market trends. The appraisal helps both buyers and sellers understand the property's worth, which is essential for negotiating an appropriate sales price.

When a lender is involved in financing the purchase, the appraisal ensures that the loan amount aligns with the property's value. If the appraisal comes in lower than the purchase price, it can affect the buyer's financing options and may lead to renegotiation of the sale price between the parties involved.

Other options, such as guaranteeing a selling price or assessing a buyer’s creditworthiness, do not accurately describe the function of an appraisal. Additionally, finalizing the closing date is related more to the transaction process rather than the appraiser's role. Therefore, determining fair market value is the primary function of an appraisal in real estate.