Property appraisal is an important component in the loan assessment process. The most common tool used for riskmanagement is the appraisal report, particularly key areas ofthe report such as the remaining economic life and conditionof the property. For example, underwriters may match upa loan’s amortization period with the remaining economiclife estimates from the property appraisal to make sure thelife of the property is longer than the life of the loan. Theappraiser’s description of the condition or quality of a certainaspect of a property may raise a red flag to the underwriterif the condition is rated “poor” rather than “good,” as it mayrepresent a risk to the lender.
- Dan Jones
 
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