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Basic Appraisal Procedures > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

A systematic set of procedures an appraiser follows to provide answers to a client’s questions about real property value

A

Valuation Process

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2
Q

How many steps in the valuation process?

A

8 steps

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3
Q

What are the valuation process steps?

A
  1. Define the problem
  2. Determine scope of work
  3. Gather, record, and verify the data
  4. Determine the highest and best use
  5. Estimate the land value
  6. Estimate value by each of the three approaches (if applicable)
  7. Reconcile the estimated values into the final opinion of value
  8. Report the final opinion of value
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4
Q

the party or parties (i.e., individual, group, or entity) who engage, by employment or contract, an appraiser by employment or contract in a specific assignment, whether directly or through an agent.

A

Client

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5
Q

We are trying to solve a valuation problem for the client. Which step of the valuation process is this?

A

Step 1: Defining the problem

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6
Q

Every parcel of real estate is ______ and has a _______set of _________.

A

unique; unique; characteristics

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7
Q

Postal addresses or assessor’s parcel numbers are not ______descriptions.

A

legal

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8
Q

Legal descriptions would be one of the three types we discussed in the Basic Appraisal Principles course:

A

Metes and Bounds
Rectangular Survey
Lot and Block

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9
Q

All rights, interests, and benefits related to the ownership of real estate

A

Real property

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10
Q

Examples of partial estates:

A

Life Interests
Easements
Encroachments

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11
Q

Examples of specialized ownership:

A

Condominium
Cooperative
PUD
Timeshare

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12
Q

Where is this stated in USPAP? “Identify, from sources the appraiser reasonably believes to be reliable, the characteristics of the property that are relevant to the type and definition of value and intended use of the appraisal”

A

Standards Rule 1-2

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13
Q

The most common type of value sought by appraisers is ______ value.

A

Market

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14
Q

a type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the value definition of the term that is identified by the appraiser as applicable in an appraisal.

A

Market Value

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15
Q

In an appraisal for a federally-related lending transaction, an appraiser must use the definition of _____ ______ found in federal banking regulations.

A

market value

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16
Q

Where does USPAP establish standards that appraisers must follow when developing an opinion of market value?

A

Standards Rule 1-2

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17
Q

The objective of an assignment—e.g., in an appraisal assignment, to develop an opinion of the defined value of a specified interest in real estate.

A

Purpose of an Assignment

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18
Q

the use(s) of an appraiser’s reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client at the time of the assignment

A

Intended Use

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19
Q

the client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser, based on communication with the client at the time of the assignment.

A

Intended User

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20
Q

Standards Rule 1-2(a) of the 2020-2021 USPAP says an appraiser must
“identify the _____ and other intended ______.”

A

client; users

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21
Q

The effective date of value can be a ______(retrospective), _____ or _______ (prospective) date.

A

past; current; future

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22
Q

Two dates are essential to an appraisal report. The _______ date of the appraisal and the date of the _______.

A

effective; report

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23
Q

The date of the _______ indicates the perspective from which the appraiser is examining the market.

A

report

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24
Q

The ______ date of the appraisal establishes the context for the value opinion.

A

effective

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25
Q

Three categories of effective dates

A

retrospective, current, or prospective

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26
Q

________ ________ ________, along with available factual data, are intended to reflect the current expectations and perceptions of market participants.

A

Prospective value opinions

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27
Q

Prospective value opinions should be judged on the support for the forecasts that existed when made, not on whether specific items in the forecasts are realized at a ______ _______

A

later date

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28
Q

If it is a retrospective appraisal, the appraiser has the luxury of knowing what went on _____ the date in the _____.

A

after; past

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29
Q

If our effective date of value is in the future, there will be an amount of ________built in.

A

uncertainty

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30
Q

Typically, if there are no other restraints or client requests for another date, the ______ date of value will be the date of the last inspection of the property.

A

effective

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31
Q

Two common types of assignment conditions are __________and ___________

A

extraordinary assumptions

hypothetical conditions

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32
Q

an assignment-specific assumption, as of the effective date, which, if found to be false, could alter the appraiser’s opinions or conclusions.

A

Extraordinary Assumption

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33
Q

Example:
When an appraiser encounters an underground storage tank on the subject property. If there is no evidence of any observable leaks, the appraiser could indicate a value opinion based on the________ _______ that the tank is indeed not leaking. If it turns out otherwise, the appraiser would retain the right to revise the value.

A

extraordinary assumption

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34
Q

A condition, directly related to a specific assignment, which is contrary to what is known by the appraiser to exist on the effective date of the assignment results, but is used for the purpose of analysis.

A

Hypothetical Condition

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35
Q

Example:
An appraiser observes that an underground tank is leaking. An appraisal can be done of the property in its “as-is” contaminated condition, or it could be appraised under the ______ _______ that the property is free of contamination. This type of appraisal could be significantly misleading to intended users if the use of the _____ _______ were not properly disclosed. USPAP requires “clear and conspicuous” disclosure of ________ _______, for obvious reasons.

A

Hypothetical Conditions

36
Q

Assumptions, extraordinary assumptions, hypothetical conditions, laws and regulations, jurisdictional exceptions, and other conditions that affect the scope of work

A

Assignment Conditions

37
Q

If you are doing an appraisal that will qualify for a mortgage loan that can be sold to Fannie Mae or Freddie Mac, you have to complete the appraisal report on one of their _____ ______ _______

A

designated report forms

38
Q

A step-by-step procedure that can be applied to any type of appraisal assignment is

  • the income approach
  • the valuation process
  • discounted cash flow analysis
  • multiple regression analysis
A

The valuation Process

39
Q

“An interest or interests in real estate” is the definition of

life interest
scope of work
title
real property

A

Real Property

40
Q

True or False: The effective date of the valuation must be the date on which the appraiser inspected the subject property.

A

False

41
Q

What is the final step in the valuation process?

  • determine highest and best use
  • estimate value by the three approaches
  • report the final opinion of value
  • estimate the land value
A

Report the final opinion of value

42
Q

Step 2 of the valuation process?

A

Determine scope of work

43
Q

The type and extent of research and analyses in an appraisal or appraisal review assignment.

A

Scope of work

44
Q

Standards Rule 1-2(h) on page 17 of the 2020-2021 USPAP says an appraiser must:
“Determine the scope of work necessary to produce credible results in accordance with the ______ __ _____ _____.”

A

Scope of Work Rule

45
Q

The SCOPE OF WORK RULE was added to the ______edition of USPAP

A

2006

46
Q

the SCOPE OF WORK RULE states:

“For each appraisal or appraisal review assignment, an appraiser must:

  1. ______the problem to be solved;
  2. _____ and _____ the scope of work necessary to develop credible assignment results; and
  3. ______ the scope of work in the report.
A
  1. Identify
  2. determine; perform
  3. disclose
47
Q

An appraiser must properly identify the ______ to be solved in order to determine the appropriate scope of work. The appraiser must be prepared to demonstrate that the scope of work is sufficient to produce ______ assignment results.

A

problem; credible

48
Q

Erica is an appraiser and is engaged by a lender to appraise a four-unit residential property for a mortgage lender. The lender tells Erica that he wants to save on the appraisal fee, and as a result, he does not want Erica to develop the income approach. He instructs Erica to value the property using the sales comparison approach only. Is this an acceptable scope of work?

A

No, probably not. It is likely that when appraising an income-producing property that other mortgage lending intended users would expect the appraiser to develop the income approach to value.

49
Q

Summarizing the scope of work includes disclosure of ______ and ______ performed and not performed.

A

research; analyses;

50
Q

In a Restricted Appraisal Report, the scope of work need only be _______. This demonstrates the differing levels of detail required in the different written report types under USPAP.

A

stated

51
Q

Step 3 in the valuation process. We need to _____, _____, and _____ the data.

A

gather, record, verify

52
Q

Data, information, and documentation necessary to support the appraiser’s opinions and conclusions and to show compliance with USPAP

A

Workfile

53
Q

An appraiser must prepare a workfile for each appraisal or appraisal review assignment. A workfile must be in existence prior to the issuance of any report or other communication of assignment results. A written summary of an oral report must be added to the workfile within a reasonable time after the issuance of the oral report.

A

Record Keeping Rule

54
Q

The _____has to be in existence ______ to the issuance of the report. In other words, you cannot go back later and create a workfile after you issue the report.

A

workfile, prior

55
Q

A workfile must include:

A
  • the name of the client and the identity, by name or type, of any other intended users;
  • true copies of all written reports, documented on any type of media (A true copy is a replica of the report transmitted to the client. A photocopy or an electronic copy of the entire report transmitted to the client satisfies the requirement of a true copy.);
  • summaries of any oral reports or testimony, or a transcript of testimony, including the appraiser’s signed and dated certification; and
  • all other data, information, and documentation necessary to support the appraiser’s opinions and conclusions and to show compliance with USPAP, or references to the location(s) of such other data, information and documentation.
56
Q

How long do you have to keep a workfile?

A

An appraiser must retain the workfile for a period of at least five years after preparation or at least two years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last.”

57
Q

What does the RECORD KEEPING RULE say about workfile custody, access and retrieval?

A

“An appraiser must have custody of his or her workfile, or make appropriate workfile retention, access, and retrieval arrangements with the party having custody of the workfile. This includes ensuring that a workfile is stored in a medium that is retrievable by the appraiser throughout the prescribed record retention period.

58
Q

To prove the truth of by the presentation of evidence or testimony; substantiate.

A

Verify

59
Q

In valuation practice, the process of validating or establishing the truth about information from another source, which is critical to credible assignment results. A valuer or reviewer may confirm information directly with a party knowledgeable about the property or the transaction involving the property or with another credible source to determine the reliability of that information for use in the assignment.”

A

Verification

60
Q

The appraiser must verify all market and comparable information used in the appraisal process and is accountable for any information presented as ‘fact’ used to develop the subject property’s value estimate.

A

What HUD expects in the way of verification in FHA appraisals.

61
Q

_______ ensures that the information is meaningful, and provides the appraiser with a firm understanding of market motivations and trends.

A

Verification

62
Q

During the verification process, it is necessary for the appraiser to gain an understanding of the motivations surrounding the sale in order to:

_______ if the sale was arm’s length and not distressed and
______ current market conditions that influence value.

A

determine; understnad

63
Q

use of data - particularly comparable sales data - provided by parties who have a financial interest in the sale or financing of the subject property without the appraiser’s verification of the information from a disinterested source. What is this an example of?

A

Unacceptable appraisal practice

64
Q

An appraiser has been asked to complete a mortgage lending appraisal on a property that is being sold in a new subdivision. The listing real estate agent for the subject property meets the appraiser at the property and gives him information on recent comparable sales in the subdivision that did not appear in the local MLS. Can the appraiser use this sales data that came from a party who has a financial interest in the sale of the subject property?

A

Yes, but only if the appraiser verifies these sales from a disinterested source.

65
Q

If the appraiser simply uses the sales provided by the sales agent without verifying with a disinterested source, this is ________according to Fannie Mae

A

unacceptable

66
Q

In the Step 4 of the valuation process, we need to develop an opinion of the _________________ of the subject property

A

highest and best use

67
Q

The highest and best use of a property must be:

A

Legally permissible
Physically possible
Financially feasible
Maximally productive

68
Q

In Step 5 of the valuation process, we ______ the _____value.

A

estimate; land

69
Q

In many cases, even if there are building improvements on the property, we are still interested in estimating the land value ________.

A

seperately

70
Q

Step 6 in the valuation process involves estimating the _____ of the ____ by the ______ to value.

A

value; property; approaches

71
Q

There are three commonly recognized approaches to value. They are:

A

Cost Approach
Sales Comparison Approach
Income Capitalization Approach

72
Q

Step 7 of the valuation process involves __________.

A

reconcilation

73
Q

Our job as an appraiser is to come to _____ reasoned opinion as to the value of a property, as of the ______ date.

A

one; effective

74
Q

The final, 8th step of the valuation process:

A

Report

75
Q

True or false: the report can only be written.

A

False, could be oral, but in most cases is written.

76
Q

True or False: A workfile must be in existence prior to the issuance of a written or oral report.

A

True

77
Q

“Documentation necessary to support an appraiser’s analyses, opinions, and conclusions” is the appraiser’s

workfile
scope of work
assignment conditions
extraordinary assumption

A

workfile

78
Q

An appraisal report must contain sufficient information to allow ________ to understand the scope of work.

other appraisers
state enforcement agencies
anyone
intended users

A

intended users

79
Q

What appraisal term is defined as “The type of data and the extent of research and analyses”?

assumption
hypothetical condition
scope of work
workfile

A

Scope of Work

80
Q

An appraiser is valuing a property under a condition that is known by the appraiser to be false. The appraiser is employing a(n) ____________ in this appraisal.

hypothetical condition
extraordinary assumption
unethical contingency
illegal assumption

A

Hypothetical Condition

81
Q

According to USPAP, the credibility of assignment results is measured ______________.

within the context of intended use
by whether or not the intended user is satisfied
based on the appraisal value
depending on the highest and best use

A

within the context of intended use

82
Q

What is the first step in the valuation process?

List the data needed
Estimate land value
Define the problem
Determine the scope of work

A

Define the problem

83
Q

The SCOPE OF WORK RULE says that “the appraiser must be prepared to demonstrate that the scope of work is sufficient to produce _________________”

credible assignments results
demonstrable analysis
supportable values
verified assignment results

A

credible assignment results

84
Q

A property’s known zoning is Residential, but an appraiser values it on the basis of its zoning being Commercial. Proper disclosures are made in the report. The appraiser has used __________ in this appraisal.

An extraordinary assumption
A jurisdictional exception
A hypothetical condition
An illegal contingency

A

A hypothetical Condition

85
Q

Where would an appraiser keep the documentation that supports her appraised value?

Workfile
Client archives
Wikipedia
Nowhere, as this information is unnecessary

A

Workfile

86
Q

An appraiser encounters a small crack in a foundation slab on a house he is appraising. He discloses the crack in the appraisal report and states that he is not a structural engineer and assumes the crack is not structural in nature and does not require a repair. This is an example of the use of a(n) ______________.

A

Extraordinary Assumption

Basic Appraisal Procedures (12 decks)

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