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January 19, 2023
An appraisal is a neutral professional judgment on the worth of a house. Appraisals are virtually always utilized in purchase-and-sale transactions, and they are also frequently employed in refinance transactions. An appraisal is used in a purchase-and-sale transaction to establish whether the contract price for a house is reasonable considering its condition, location, and characteristics. An appraisal ensures the lender does not give the borrower more money than the home is worth in a refinancing deal. Because the residence acts as security for the mortgage, lenders want to ensure that homeowners are not overborrowing for a property. If the borrower defaults on the mortgage and the house goes into foreclosure, the lender will sell it to repay the money it owes. The evaluation protects the bank against lending more than it can recover in this worst-case situation.