What value does an appraisal provide to lenders?

An appraisal provides critical value to lenders by validating the requested loan amount against the market value of the property. This process ensures that the loan amount aligns with the actual market conditions and the property's fair value. By determining the market value, the lender can assess the risk associated with the loan. If the loan amount exceeds the appraisal value, the lender might reconsider the terms of the loan or even deny it, as this presents a higher risk of loss in the event of foreclosure. Essentially, an accurate appraisal safeguards lenders by ensuring that they do not provide financing for more than what the property is worth, thereby protecting their investment.

While other choices mention important aspects related to lending or homeownership, they do not directly relate to the primary objective of an appraisal from a lender's perspective. For instance, preventing borrowers from obtaining unaffordable loans, determining property taxes, and assessing creditworthiness are functions that involve other processes and evaluations outside of what an appraisal specifically provides.