Difficulty: Hard

Average Score: 33%

The mortgagee will usually require an appraisal to ensure that the

Rationale

Value of the property is sufficient to secure the loan.

The primary reason a mortgagee requires an appraisal is to confirm that the property's value is adequate to cover the amount being loaned. This ensures that the lender has collateral in case the borrower defaults on the mortgage.

A (Purchaser is not paying more than fair market value.) YOUR ANSWER

While an appraisal can provide insight into fair market value, its main purpose for the mortgagee is to assess the property's value as collateral rather than to protect the purchaser from overpaying. The focus is on the lender's security rather than the buyer's financial decision.

B (Buyer has sufficient income to meet the monthly payments.) YOUR ANSWER

This choice pertains to the borrower's financial qualifications and ability to repay the loan, which is assessed through a different process involving income verification and credit checks. An appraisal does not determine the buyer's income or ability to make payments.

C (Selling price is competitive with similar properties.) YOUR ANSWER

Although an appraisal may indicate whether the selling price aligns with comparable properties, this is not the primary concern of the mortgagee. The lender is more focused on the property's assessed value to ensure it sufficiently secures the loan rather than just its competitiveness in the market.

Conclusion

The mortgagee's requirement for an appraisal is fundamentally tied to the need for adequate collateral, ensuring that the property's assessed value is sufficient to cover the loan amount. While other factors like market value and buyer qualification are important in the real estate transaction, they do not directly address the mortgagee's primary concern of securing the loan with a valuable asset.

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