What is the main purpose of the appraisal during a loan application?

The primary purpose of an appraisal during a loan application is to establish the value of the property being financed. This valuation is crucial for the lender, as it helps ensure that the amount being loaned aligns with the actual worth of the property. By determining its fair market value, the appraisal protects both the bank and the borrower from investing more than what the property is worth.

While setting a sale price or assessing neighborhood safety may be relevant in a real estate transaction, these are not the central goals of an appraisal in the context of a loan application. Determining market trends is more of a broader analysis that supports real estate decision-making over an extended period rather than the immediate focus of a specific property appraisal. The appraisal's core function is to provide an objective valuation, which is essential for the lender to mitigate risk and for the borrower to understand the investment's worth.