Property Valuation
An appraisal performed to estimate value for a mortgage loan is typically ordered by:
AThe real estate agent
BThe lender✓ Correct
CThe buyer personally
DThe title company
Explanation
For mortgage lending purposes, the lender orders and controls the appraisal to ensure the property supports the loan amount. The appraiser is selected by the lender, often through an Appraisal Management Company.
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Key Terms to Know
Appraisal
A professional estimate of a property's market value prepared by a licensed or certified appraiser.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Capitalization Rate (Cap Rate)A rate used to estimate the value of income-producing property, calculated as Net Operating Income divided by property value.
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