Why would a mortgagee require an appraisal on a property?

A mortgagee, typically the lender in a real estate transaction, would require an appraisal on a property primarily to assure that the property's value is sufficient to cover the loan amount being requested by the borrower. This is a critical aspect of the lending process, as the appraisal provides an objective assessment of the property's market value, helping the lender determine whether the risk of lending is acceptable.

If the property's market value is found to be less than the loan amount requested, the lender may decide to adjust the loan terms, require a larger down payment, or deny the loan altogether. This minimizes the lender's risk, ensuring that, in case of default, they can recover their investment through the sale of the property.

The other options relate to aspects that are generally of less immediate concern to the lender. For instance, estimating potential rental income is more relevant to an investor seeking to understand the property’s income-generating potential but does not address collateral value directly. Understanding tax implications might be important for the borrower but is not a primary concern for the lender when assessing the risk of the loan. Identifying market trends can be useful for investment strategies but does not directly influence the value assurance that an appraisal provides in the context of securing a loan.