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An appraisal is an estimation of home's market value done by a licensed appraiser using comparable recent sales of a home in the neighborhood. Real estate brokers cannot perform appraisal. Appraisals are ordered on behalf of a home buyer's lender to protect the interest of the lender. The lender's underwriter will compare the appraisal price to the final sales price of the home to ensure the value of the home is equal to or greater than the loan amount. If the home appraised lower than the final sales price, the home buyer may be able to renegotiate a lower price with the seller. If the seller will not lower the price, the buyer's lender may ask that the buyer put more money toward their down payment in order to make the difference or the buyer can walk-away and receive earnest money back.
So in order to set the price of a listing by a buyer and to determine whether that price is at fair market value the respective agents are going to be looking at comparable sales. They will:

• Look up sales within the past 3 to 6 months in the same building if possible and if not as close as possible to the subject property (usually within 1 mile radius). They will look as close as possible in the neighborhood. If there have been no sales within that period of that direct neighborhood, they will go back further or extend the area. This will be done using Multiple Listing Service sales data which is the most current and accurate.

1. Amenities such as pool, parking etc.
2. Size
3. Location
4. Upgrades
5. Adjust the price of the comparable property according to the pluses and minuses of those homes compared with the subject property. For instance, if the comparable property has a swimming pool and the subject property doesn't, then the comparable price will be lowered. The opposite is true if the subject property has the pool (see above and below-grade/ground adjustment below). Above and below grade means above and below ground and does not imply superior or inferior quality. 
6. Check for extenuating circumstances such as a short sale or foreclosure which are hardship sales and unfairly skew the prices. 
7. Not take into consideration current listings in the area of the subject property that have not been sold yet.

Per FNMA guidelines - "Only finished above-grade/ground areas can be used in calculating and reporting of above-grade room count and square footage for the gross living area. Fannie Mae considers a level to be below-grade if any portion of it is below-grade, regardless of the quality of its finish or the window area of any room. Therefore, a walk-out basement with finished rooms would not be included in the above-grade/ground room count. Rooms that are not included in the above-grade room count may add substantially to the value of a property, particularly when the quality of the finish is high. For that reason, the appraiser should report the basement or other partially below-grade areas separately and make appropriate adjustments for them on the Basement & Finished Rooms Below-Grade line in the Sales Comparison Approach adjustment grid."
 

What Is Appraised Value?
Appraisals provide an objective opinion of value but is not an exact science, therefore appraisals may differ.  Appraisals are usually based on market value of what the property could probably be sold for in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as a specified date and the passing of title from seller to buyer under conditions whereby: 

1. Buyer and seller are typically motivated; 
2. Both parties are well informed or well advised and each acting in what he considers his own best interest; 
3. A reasonable time is allowed for exposure in the open market;
4. Payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 
5. The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. 

What is a Comparative Market Analysis?