Question

How does the lender determine whether the property is worth the sales price?

A) By consulting with the real estate agent
B) Using an automated property valuation model
C) Relying solely on the borrower's appraisal
D) Based on the neighborhood's average income

Answer 1

Lenders typically use an appraisal, which may involve an automated property valuation model, to determine if the property is worth the sales price. This process takes into account factors such as location, condition, and recent sale prices of similar properties.

Step-by-step explanation:

When determining whether a property is worth the sales price, the lender will often carry out an appraisal of the property.

This involves a thorough assessment of the property's value, considering various factors like location, condition, improvements, and the prices of comparable properties recently sold in the area.

One common method is using an automated property valuation model (APVM), which uses algorithms and property data to estimate value. Other factors, such as the borrower's creditworthiness and changes in interest rates, can also influence the perceived value of the property and the loan.