Illinois Broker Reciprocity Practice Exam

The primary role of appraisals during mortgage financing is centered on determining the property value for loan justification. Lenders require an appraisal to assess the market value of the property being financed and ensure that it is sufficient to secure the loan amount requested by the borrower. This valuation process helps protect the lender's investment, as it provides an objective measure of what the property is worth in the current market.

The appraised value informs lenders whether the property is an acceptable risk for financing, as it establishes a baseline for collateral. If the loan amount exceeds the appraised value, it may signal to the lender that the borrower could be taking on too much debt relative to the property's worth, which could lead to higher risks of default.

While other aspects of property assessment—such as its legal description, its current condition, or future value trends—are important in real estate transactions, none serve the primary financing purpose as directly as determining the current market value for justification of the loan.