An appraisal is trying to determine the fair market value of a home. What is the price a willing buyer and seller would agree upon in the free market at arms length.
There are several methods for arriving at that fair market value. The most common is the sales comparison approach whereby similar homes that have sold in the general geographic area in the recent past are ‘compared’ to the subject property. Adjustments are made for various items and and the appraiser comments on the arrival of a value based on those comparisons.
The cost approach uses a method that involves the cost to rebuild the home in its exact detail with a depreciation factor built in. Unless the home is fairly new, this approach is not given much weight in determining a value. And the 3rd method, usually used only for multi-family homes, is the income approach. Rental schedules are developed and for a single family home this is not the ‘highest and best use’, so it is rarely used.
In short, the ‘appraised value’ IS the ‘fair market value’ in the opinion of the appraiser on the date of the inspection.