Chapter 1 Appraising vs Reporting Flashcards
the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Appraisal
any communication, written or oral, of an appraisal or appraisal review that is transmitted to the client or a party authorized by the client upon completion of an assignment.
Report
The difference between Appraising and Reporting
An appraisal is an intellectual process, in which an appraiser forms an opinion of value. On the other hand, the appraisal report is the communication of the appraisal, or value opinion, which the appraiser has formed.
The appraisal development process: Is governed by Standard 2 Is an intellectual process Must be reported in writing Communicates the value opinion to the client
is an intellectual process
The terms appraisal and report: Are not synonymous Are outdated and should not be used Mean the same thing in USPAP Both refer to the communication of the value opinion to the client
are not synonymous
For today’s residential real property appraiser, the appraisal development and reporting processes:
Have no relationship to one another
Are addressed in USPAP in one Standard
Sometimes seem to overlap due to reliance on form software
Should be completed on different days to avoid confusion
sometimes seem to overlap due to reliance on form software
The reporting of a real property appraisal is the subject of: USPAP STANDARD 1 USPAP STANDARD 2 USPAP STANDARD 3 None of these answers
USPAP STANDARD 2
There is no difference between the meanings of the terms appraisal and appraisal report.
True
False
false
Standard 1 of USPAP states:
In developing a real property appraisal, an appraiser must identify the problem to be solved, determine the scope of work necessary to solve the problem, and correctly complete research and analyses necessary to produce a credible appraisal.1
In reporting the results of a real property appraisal, an appraiser must communicate each analysis, opinion, and conclusion in a manner that is not misleading.
Standard 2
Intentionally or unintentionally misrepresenting, misstating, or concealing relevant facts or conclusions.
Misleading
The steps in the appraisal process include:
- Identification of the problem
- Determination of the scope of work
- Collection and analysis of the data
- Determination of highest and best use
- Application of the approaches to value
- Reconciliation
- Reporting of the appraisal
the party or parties (i.e., individual, group, or entity) who engage an appraiser by employment or contract in a specific assignment, whether directly or through an agent
client
What is the reason for this appraisal?
Why is this appraisal needed? How is the appraisal going to be used? What sort of problem is this appraisal intended to solve?
In the development of a real property appraisal, the value opinion must be:
Affordable
A specific number
The average of the three comparable sales
Credible
credible
Maxine has developed a credible opinion of value on a vacant lot she is appraising. What is her next responsibility?
Properly communicate this opinion to the client
Forward an invoice for payment
Make sure her value opinion fits the client’s needs
Run an AVM on the property to see if her value opinion falls within an acceptable range
properly communicate this opinion to the client
Communication with the client is NOT important during the problem identification phase of an assignment.
True
False
false
the date to which an appraiser’s analyses, opinions, and conclusions apply; also referred to as date of value
effective
the date to which an appraiser’s analyses, opinions, and conclusions apply; also referred to as date of value
retrospective value opinion
If the assignment is for a future effective date, the value would be
prospective
To determine the appropriate scope of work for the individual assignment, the appraiser must:
- Rely on the information gained in the first step of the appraisal process. Proper identification of the problem is essential.
- Ensure that he or she has the knowledge, experience, and competency to accomplish this assignment.
- Determine the client’s expectations for this type of assignment.
- Not allow the assignment conditions to limit his or her ability to arrive at a credible opinion of value, given the intended use of the appraisal.
- Be able to support the decision for the level of work to be accomplished.
- Be prepared to defend the research and analysis he or she decided was not required for this assignment’s credible opinion of value.
When an appraiser asks a client what type of value is needed in an appraisal assignment, what is he or she asking the client?
What is the value needed to make the loan?
How much do you think the property should appraise for?
What definition of value is to be used in the appraisal?
Is the appraisal fee going to be based on the value opinion?
what definition of value is to be used in the appraisal
When a property is appraised with an effective date that is some time in the future, this is a(n): Retrospective appraisal Prospective appraisal Unacceptable assignment condition Violation of USPAP
prospective appraisal
What may happen if the client provides the appraiser with incorrect or incomplete property information?
The appraiser must withdraw from the assignment
A hypothetical condition may be necessary in the assignment
The appraiser may not be paid
A non-credible value opinion may result
a non-credible value opinion may result
Some of the basic elements in the consideration of the highest and best use (HBU) of the subject include, but are not limited to:
Supply and demand Competition Conformity Site size Building restrictions Zoning requirements Building codes Market area trends
In order to be considered the highest and best use for a property, the use must be:
Physically possible
Legally permissible
Financially feasible
Maximally productive
The sales comparison approach is based primarily on the principles of
contribution and substitution
The Cost Approach is also known as the
summation approach to value
The principle of substitution is at work with which approach to value?
cost approach
Age-life method:
A building has an effective age of 15 years and a total economic life of 60 years.
15 divided by 60 = 25% depreciation
Cost new of structure = $ 65,000
Subtract depreciation @ 25 % = ($16,250)
Depreciated value of structure = $ 48,750
Highest and best use analysis is mandatory in all real property appraisal assignments.
True
False
false
Which of these is NOT one of the criteria for highest and best use? Legally permissible Physically possible Socially acceptable Financially feasible
socially acceptable
A home has an outdated kitchen, which can be remedied at a cost of $10,000. After the kitchen is updated, the value of the home will increase from $124,000 to $129,000. What type of depreciation is this? Physical, incurable Physical, curable Non-functional, curable Functional, incurable
functional, incurable
Which principle is at work with the income approach?
principle of anticipation
Reporting is the ____ step of the overall appraisal process
final
Oral appraisal reports are recognized under USPAP; however this type of report is not permissible for mortgage lending appraisal assignments qualifying as
federally related transactions
If the appraisal is intended for use in a federally related transaction, it must be presented in a
written report
The income approach is based on the principle of \_\_\_\_\_\_\_\_. Substitution Contribution Anticipation Externalities
anticipation
What type of income approach is typically used for small residential properties? Gross rent multiplier Capitalized value of rent loss Discounted cash flow Depreciated cost basis
gross rent multiplier
Reconciliation is the process of averaging the indications of the approaches to value into a final value indication.
True
False
false
The appraiser should never simply average the value indications from the approaches to value into an opinion of value
What is the final step in the overall appraisal process? Reporting the appraisal Reconciliation Highest and best use analysis Invoicing
reporting the appraisal
What is defined as the act or process of developing an opinion of value?
Evaluation
Appraisal report
Uniform Residential Appraisal Report (URAR)
Appraisal
appraisal
In order to solve the client's problem, appraisers must find answers to some basic questions By the effective date of the appraisal. at the time of engagement. before the report is submitted. Never
at the time of the engagement
The reporting of a real property appraisal is the subject of: USPAP STANDARD 1 USPAP STANDARD 2 USPAP STANDARD 3 None of these answers
USPAP STANDARD 2
Kristin develops an opinion of value, prepares it in a written format, and mails it to her client. What has she mailed to the client?
An appraisal
An appraisal review
A preliminary opinion of value, for which USPAP has no standards
A report
A report
Highest and best use analysis is required in
all written appraisal assignments.
all market value appraisal assignments.
all investment value appraisal assignments.
it is never required
all market value appraisal assignments
