Final answer:
An appraisal is required for higher loan amounts to ensure the property's value justifies the loan being secured. Freda and Ben's examples demonstrate how property values and equity can play a role in loan security and the appraisal process.
Step-by-step explanation:
The student has asked what amount a requested loan must exceed for a real estate (RE) appraisal to be necessary when the property is taken as security. While the provided information does not contain a direct answer to this question, general banking norms suggest that an appraisal is typically required for higher loan amounts to assess the value and risk of the loan. Two hypothetical scenarios are presented for illustration:
- Freda's property, purchased at $150,000, is now worth $250,000, and she has full equity because she owes nothing to the bank.
- Ben's property, purchased at $100,000 with a 20% down payment and the remainder borrowed, which he partially paid off, is now worth $160,000. He owes $60,000 to the bank, making his equity $100,000.
While these cases do not directly answer the question, they exemplify how equity and value can change and influence lending and appraisal decisions. It should be noted that the threshold for requiring an appraisal can vary based on the lender's policies and regulations.