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Residential Report Writing and Case Studies > Chapter 4 THE UNIFORM RESIDENTIAL APPRAISAL REPORT > Flashcards

Chapter 4 THE UNIFORM RESIDENTIAL APPRAISAL REPORT Flashcards

1
Q

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

A

ASSIGNMENT CONDITIONS

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2
Q

Some of the more common Fannie and Freddie forms include:

A

1004 (70) - Uniform Residential Appraisal Report
2055 (2055) - Exterior-Only Inspection Residential Appraisal Report
1073 (465) - Individual Condominium Unit Appraisal Report
1075 (466) - Exterior-Only Inspection Condominium Unit Appraisal Report
1025 (72) - Small Residential Income Property Appraisal Report
2000 (1032) - One-Unit Residential Appraisal Field Review Report

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3
Q

Ty receives a single-family appraisal request from a small local bank which does not sell loans on the secondary mortgage market. Which appraisal reporting format is this client most likely to request?
A form created by Fannie Mae
A form created by his state appraisal board
A form created by the Appraisal Standards Board (ASB)
A narrative-type report

A

A form created by Fannie Mae

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4
Q

Fannie Mae and Freddie Mac are responsible for creating most of the commonly-used residential appraisal report forms.
True
False

A

True

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5
Q

James is appraising a proposed new home, and he believes the cost approach is necessary for credible results. However, the URAR form states the cost approach is not required. What should he do?
Follow the instructions on the form and not complete the cost approach
Complete the cost approach
Not complete the cost approach, and invoke the DEPARTURE RULE
Ask his client if he needs the cost approach

A

Complete the cost approach

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6
Q

In almost every instance, an appraiser must supplement the standard forms with ______ in order to comply with the minimum content requirements of Standard 2

A

additional information

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7
Q 
Fannie Mae last revised its residential appraisal report forms in:
September 1986
July 1993
March 2005
January 2006
A

March 2005

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8
Q

Secondary market appraisal guidelines are intended to take the place of USPAP.
True
False

A

false

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9
Q

Each of the report options outlined in Standards Rule 2-2 (a),and (b), has twelve(12) numbered minimum content requirement items.
True
False

A

false

The Appraisal Report has 14 required items and the Restricted Appraisal Report has 16 required items.

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10
Q

The pre-printed scope of work for this assignment has been prepared for the appraiser by the secondary market participants (Fannie Mae and Freddie Mac) and identifies their minimum requirements for the assignment:

A

-Perform a complete visual inspection of the interior and exterior areas of the subject property (for the URAR form)
-Inspect the neighborhood
Inspect the comparable sales from, at least, the street
-Research, verify, and analyze data from reliable public or private sources
-Report analysis, opinions, and conclusions in the appraisal report

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11
Q 
The URAR form has been identified by the ASB as generally meeting the reporting requirements for a:
Self-Contained Appraisal Report
Appraisal Report
Restricted Appraisal Report
Limited Report
A

appraisal report

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12
Q 
The Fannie Mae 1004 form may be used to report an appraisal on:
Single-family homes with accessory units
Single-family homes
Units in planned unit developments
All of these answers
A

all of these answers

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13
Q

The URAR form dictates the amount of information to be supplied to the appraiser’s client.
True
False

A

false

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14
Q

Let us look at the current version of the URAR form. This six-page form is divided into the following sections:

A

Page 1:

Subject Section
Contract Section
Neighborhood Section
Site Section
Improvements Section (includes a Comments section)
Page 2:

Sales Comparison Approach Section (includes the Sales History section)
Reconciliation Section
Page 3:

Additional Comments Section
Cost Approach (not required by Fannie Mae or Freddie Mac)
Income Approach (not required by Fannie Mae or Freddie Mac)
Project information for PUDs (if applicable)
Page 4:

Types of Properties appraised using this form, Scope of Work (SOW), Definitions, Assumptions, and Limiting Conditions

Pages 5 & 6:

Appraiser and Supervisory Appraiser’s Certifications and Signature Sections

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15
Q

Include the house number and the street name and identify the street direction, if applicable. A rural route number or a post office box number are not considered to be acceptable property addresses.

A

property address

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16
Q

you will need to research public records for this information. In a purchase transaction, if the seller on the sales contract is not the current owner of record, this is considered a red flag by most lenders.

A

owner of public record

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17
Q

Who is the individual or individuals applying for the mortgage? This information should be on the sales contract, or if a refinance, the client should have this information from the loan application. If the loan is a refinance, the lender will want to ensure that the borrower’s name is the same as the current owner of record.

A

Borrower

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18
Q

There are three common ways to identify property – Lot & Block, Metes & Bounds, and Rectangular Survey. This information can be obtained from the deed, preliminary report of title, etc.

A

Legal Description

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19
Q

This information can be obtained from the assessor’s office, treasurer’s office, or tax bill. The assessor’s parcel number is referred to as the property index number or “PIN” in some areas of the United States. It is a tax assessor’s designator to identify a parcel.

A

Assessor’s Parcel number and real estate taxes

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20
Q

If the neighborhood has a common name, it can be identified here. Many neighborhoods do not have this distinguishing characteristic. Map reference is purely a local designator used by the lender/client to replicate the appraiser’s identification sources.

A

Neighborhood name and map reference

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21
Q

Can be obtained from the Internet: American Fact Finder. This is a free website and will also give you some demographic information relating to the area.

A

Census Tract

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22
Q

he special assessments indicated here apply to obligations for public improvements for a particular area such as sewers, water, curbing, or other street improvements. Such obligations are deemed to be short-term in nature. A pro-rated amount is added to the tax bill of each property owner until the costs of the improvements for the area are repaid in full.

A

Special Assessments

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23
Q

These fees paid monthly or yearly. Any property that is held in fee simple estate and has a mandatory membership and lien-supported assessment by the homeowners association (HOA) must be classified as a Planned Unit Development or PUD.

A

Homeowners fees

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24
Q

Will almost always be fee simple for residential properties. With fee simple estate, all of the property rights are intact and no other encumbrances are in effect. The interest might be leased fee, if the property is tenant-occupied.

A

Property Rights appraised

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25
Q

Is the assignment for a purchase transaction? If so, complete the next section for sale information. Is the assignment for a refinance transaction? Check if applicable. “Other” could refer to a home-equity loan or request for a foreclosure appraisal. If so, you will need to explain the “other” conditions for the assignment.

A

Assignment type

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26
Q

A financial institution or mortgage lender is usually the client. The client is the party with whom you have an appraiser-client relationship and may be an individual, group, or entity. Most appraisal management companies (AMCs) engage appraisers as agents for the lender/client, and therefore do not consider themselves to be the client. However, some AMCs do consider themselves to be the appraiser’s client. If in doubt, check with the AMC.

A

Lender/client

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27
Q

Did you analyze all Sales Contracts for this property? If so, summarize the results of your analysis on the report. If the analysis was not completed, you must indicate why. If the contract was available for your analysis:

A

Is the contract signed by all of the parties?
Is the seller a relative, real estate agent, or employer?
Is the seller on the contract a different name than the owner of public record?
Do seller concessions appear excessive?
Is the sale price significantly below market value?

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28
Q

For a purchase transaction, enter the exact sales price according to the contract. If the appraisal is for a refinance, the appraiser is instructed to leave this field blank. Some appraisers enter the abbreviation “REFI” in this field, which is not an acceptable entry according to the UAD.

A

Contract Price

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29
Q

For a purchase transaction, enter the date of the contract. The date of contract is the date all parties agreed to the terms of sale. If the appraisal is for a refinance transaction, leave this field blank.

A

Date of contract

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30
Q

Determined by visual observation. If rural in character, you will need to further explain your decision and comment on the aspects of marketability for the subject. That pocket subdivision surrounded by horse farms, but near neighborhood amenities, is probably better defined as suburban rather than rural in location. If this is the case, you will need to provide additional support and explain the effect on marketability of the subject.

A

Location

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31
Q

Determined by visual observation. If under 25 percent, explain the effects on marketability for the subject.

A

Built-up

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32
Q

Determined by visual observation. If the growth rate is rapid or slow, comment on how the marketability of the subject is affected.

A

Growth

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33
Q

Determined by data analysis. If property values are increasing or decreasing, explain the effect on marketability of the subject.

A

Property Values

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34
Q

Determined by visual observation and data analysis. Explain the effect on marketability of the subject if there is either a shortage or an oversupply.

A

Demand/supply

35
Q

This is determined by data analysis. Fannie Mae states that this is “the average amount of time it should take to sell a reasonably priced house to sell in the neighborhood”. If the average is over six months, further analysis and explanation are required. This relates to the typical marketing time for properties in the defined neighborhood; this is not an estimate of the subject property’s reasonable exposure time.

A

Marketing Time

36
Q

Determined by data analysis. The low, high, predominant price/age information is all based on visual observation and data analysis. Isolated high or low prices should not be considered when compiling this information.

A

One-unit housing price/age

37
Q

Determined by visual observation. The “other” block is used to identify industrial land use or vacant land area. Comments relative to the effect on marketability would likely be required if the commercial or industrial use is a significant percentage of use in the defined neighborhood area. The percentages defined here should add up to 100 percent.

A

Present Land Use

38
Q

The neighborhood is typically identified by man-made boundaries (streets, railroad tracks, highways) or natural boundaries (rivers, lakes, streams). The boundaries (north, south, east, and west) should be identified in this section of the report.

A

Neighborhood Boundaries

39
Q

This is where we are starting to paint that picture and fill in the particulars for the lender/client. What are the benefits of ownership in this particular market area, and what appeal does this neighborhood have relative to other neighborhoods in the community? What are the average days on market for properties in this neighborhood? What is the ratio of closed sales versus expired offerings in this neighborhood? What is the absorption rate per month? How long would it take to sell the available offerings now on the market?

A

Neighborhood characteristics and Market Conditions

40
Q

Absorption Rate Calculation:
Let’s say that 15 houses in the neighborhood were sold and closed in a 12-month period. The absorption rate per month is:

A 
# of closed sales in the period (15) /
  # of months in the period (12)

15 divided by 12 = 1.25 absorption rate per month

41
Q

Absorption Period Calculation (Unsold Inventory Index):
Now let’s assume that six houses are currently for sale in the neighborhood. How long will it take to sell this inventory if the absorption rate is 1.25?

A

of properties for sale (6) / Absorption Rate (1.25)

6 divided by 1.25 = 4.8 months to absorb or sell the existing inventory

42
Q

On an appraisal report for a refinance loan, the lender will want to ensure that the name of the borrower:
Includes any nicknames or aliases
Is not disclosed to the appraiser due to privacy concerns
Is the same as the current owner of record
Is different than the current owner of record

A

is the same as the current owner of record

43
Q

If the current agreement of sale indicates that the seller is not the current owner of record, this is considered a red flag by most lenders.
True
False

A

true

In a purchase transaction, if the seller on the sales contract is not the current owner of record, this is considered a red flag by most lenders.

44
Q

Which of these conditions would be considered a “red flag” in a residential mortgage lending appraisal assignment?
The pending sale appears to be an arm’s-length transaction
The sale contract provided by the lender is signed and dated
Seller concessions are excessive for the market
The seller’s name on the contract is the same as the owner’s name in public records

A

seller concessions are excessive for the market

45
Q

The different sides of the site are reported in linear feet, e.g., 55’ x 120’, or 120’ x 150’ x 70’ x 145’.

A

Dimensions

46
Q

This is the size stated in terms of square feet. Using the above dimension of 55 x 120, the total square footage would be 6,600 square feet, which would be reported as “6600 sf”. For parcels one acre in size or larger, the site size is required to be reported in acres, to two decimal places. For example, a site may have 59,035 square feet. There are 43,560 square feet in an acre; therefore 59,035 divided by 43,560 = 1.36 acre, which would be reported as “1.36 ac”.

A

Area

47
Q

This should be reported as a geometric shape; e.g., square, rectangular, triangular, flag, odd, irregular.

A

Shape

48
Q

Historically, Fannie and Freddie had provided little guidance in regard to this; as a result, appraisers provided a wide variety of responses in this area of the form. The Uniform Appraisal Dataset (UAD) changed all this by requiring standardized responses from a list of abbreviations (although the appraiser can also select “other” if the appropriate view descriptor does not appear on the list). The UAD requirements only apply to loans that are sold to Fannie Mae or Freddie Mac or are FHA or VA loans. Not all appraisals using the URAR form are required to comply with the data standardization requirements of the UAD.

A

View

49
Q

enerally, the residential zoning classification contains two parts: a letter and a number. The letter is normally “R”, which identifies the area as residential in character. The letter is normally followed by a number which identifies the density allowed for that particular zoned area. For example, “R-1” stands for residential with a density of “1.” Generally, the lower the number, the lower the allowed density for the area. This may vary from municipality to municipality, especially for communities with highly-detailed and strictly-enforced zoning requirements.

A

Specific Zoning Classification

50
Q

The zoning classification only tells part of the story. “R-1” can mean different things in different locations. The zoning description must also be stated on the form, for example, “Low Density Single-Family District.”

A

Zoning Description

51
Q

This refers to the fact the property is being used in compliance with the current zoning ordinance.

A

Legal

52
Q

identifies a “grandfathered” condition. The property was in compliance with previous zoning ordinances, but is not in compliance with the current ordinance. The current property use is allowed to continue in a legal non-conforming status.

A

Legal non-conforming

53
Q

This usually applies to the actual use of the site. The improvements are not being used in accordance with the allowable uses outlined in the zoning ordinance. This frequently refers to a house in a residentially zoned area being used for a commercial enterprise. It could also account for the single-family home being used as a multi-family apartment building without some sort of variance or special use permit from the zoning authority. Generally speaking, Fannie Mae and Freddie Mac will not purchase a mortgage on a property if its current use is not legal.

A

Illegal

54
Q

In most situations, you will find the HBU for residential properties to be their _______ use

A

present

55
Q

simply checking the box indicating that the property’s current use is the highest and best use is not a summary level of detail. To meet the requirements of USPAP, a ________ of your support and rationale for the property’s HBU must be included in the report.

A

summary

56
Q

This information is determined by visual observation and data analysis. The specific information includes identifying the one-unit property, either with or without an accessory unit (garage apartment, coach house, etc.); number of stories in the improvement; whether the improvements are attached (townhouse or rowhouse) or a detached one-unit structure; the style of the improvement; the year the structure was constructed; and the effective age of the improvement.

A

general information

57
Q

This information can be determined by visual observation on the part of the appraiser. HUD/FHA requires an appraiser to make, at a minimum, a “head and shoulders” entry into the attic area. Fannie Mae does not require inspection of the attic area unless there appears to be a reason to do so.

A

Attic

58
Q

Information for this sub-section is determined by visual observation. The foundation can be a concrete slab, crawl space, full basement, or partial basement. What is the square footage of the basement area? Is there any evidence of infestation, dampness, or settlement?

A

FOundation

59
Q

This information can be determined by visual observation. The appraiser must identify the type of heating and what the fuel source is. FWA is forced warm air. HWBB means hot water baseboard in some areas of the country. In other areas of the country, HWBB is hard-wired baseboard heating. The appraiser will need to identify what HWBB means in the particular area. RADIANT can be used with either electric cable or hot water lines. OTHER may apply to gravity flow heat. Fuel source may be natural gas, fuel oil, electric, propane, solar, etc. The type of cooling is identified by the appraiser as central air, individual, or other (such as attic exhaust fan), as the case may be.

A

Heating and cooling

60
Q

If an appraiser checks the box on the URAR form that states that the highest and best use of the subject property is its current use, this is considered summary support for the appraiser’s highest and best use opinion.
True
False

A

False

61
Q 
What is another name for a legal non-conforming use?
Highest and best use
Illegal use
Grandfathered use
Ultimate use
A

Grandfathered use

62
Q 
A rectangular property measures 800' x 900'. How would the site size be reported on the URAR form?
Typical site size
16.53 ac
72,000 sf
720,000 sf
A

16.53 acres

63
Q

Data collection and analysis are required, to indicate the number of comparable properties that are currently offered for sale in the subject

A

neighborhood

64
Q

Data collection and analysis are also required in order to identify the number of comparable sales that have sold during the past ___ months in the subject neighborhood.

A

12

65
Q

Sales history analysis is required for the subject and all comparable sales used in the sales analysis. Some of the more common data sources that may be available in your area are:

A 
Assessor records
Multiple listing service
Listing agent or selling agent
Owner
Recorder of deeds
HUD-1/Closing statements
66
Q

If you developed the Cost Approach, you must supply adequate information to support your calculations and subsequent analysis. For the Cost Approach, you will need to summarize the following:

A

Support for the opinion of site value. What method was used to determine the site value? The most common method used to determine a residential site value is the Sales Comparison method. There are other approaches as well, including allocation and market extraction. The appraiser must be able to appropriately support his or her opinion of site value.

What is the source of your cost data; subject’s quality rating from the cost data; effective date of the cost data? Many appraisers use published national cost manuals. One of the most popular cost services is found in the Marshall & Swift Residential Cost Handbook. Other cost services are provided by Means Residential Cost Service and F.W. Dodge. Fannie and Freddie require cost source information and quality ratings so that clients and/or reviewers will be able to replicate the appraiser’s cost figures. If the appraiser elects not to use a published cost manual, and instead relies on information from local builders and/or data from the appraiser’s files, this information must be summarized in the report as appropriate.

Income Approach: If you developed the Income Approach, you will need to summarize your opinion of the appropriate market rent for the subject, and how the gross rent multiplier (GRM) was obtained. It is inappropriate to simply use a market rent and a selected GRM without a summary explanation and support of how these numbers were derived.

67
Q

As previously stated, the URAR form is not intended for use in reporting the appraisal of

A

a condominium unit, a co-op unit, or a HUD-code manufactured home

68
Q

The URAR form can be used to report an appraisal on a modular home.
True
False

A

True

69
Q

USPAP sets forth guidelines establishing how recent and proximate comparable sales must be.
True
False

A

False

70
Q

At the top of page 2 of the URAR form, which listings and sales should be considered and reported?
All sales and listings within the defined neighborhood
All sales and listings within the local municipality
Only properties that have sold within the prior three months
Only properties that are comparable to the subject property

A

Only properties that are comparable to the subject property

71
Q

USPAP sets forth guidelines establishing how recent and proximate comparable sales must be.
True
False

A

False

72
Q 
Fannie Mae last revised its residential appraisal report forms in:
September 1986
July 1993
March 2005
January 2006
A

March 2005

73
Q 
The Fannie Mae form \_\_\_\_ is intended to be used to report an appraisal on modular or panelized homes.
1004
1005C
1025
1073
A

1004

74
Q 
Standards Rule \_\_\_\_\_ provides a convenient checklist for appraisers to ensure they are complying with the minimum report content requirements of USPAP.
2-2
2-3
2-4
1-2
A

2-2

75
Q 
Which valuation principle is most closely associated with the sales comparison approach?
Conformity
Contribution
Anticipation
Change
A

contribution

76
Q 
The Fannie Mae 1004 form may be used to report an appraisal on:
Single-family homes with accessory units
Single-family homes
Units in planned unit developments
All of these answers
A

all of these answers

77
Q

Three common ways to identify a property are:
Tax cards, lot & block, and assessors’ records
Assessors’ records, lot & block, and metes & bounds
Preliminary report of title, tax records, and metes & bounds
Metes & bounds, lot & block, and rectangular survey

A

metes & bounds, lot and block, and rectangular survey

78
Q 
For real property appraisal reports, USPAP compliance is determined by:
Form
Style
Content
Format
A

content

79
Q

When appraising a single-family home, an appraiser decides not to develop the income approach. What is the appraiser’s requirement for reporting this on the URAR form?
State that the approach was not developed
Explain the reason the approach was not developed
Develop the approach anyway and keep it in the workfile
Nothing; the client does not expect the income approach to be developed on an appraisal of a single-family home

A

explain the reason the approach was not developed

80
Q 
For purposes of the URAR form, which statement is true concerning effective age and actual age?
The form asks for only effective age.
The form asks for both.
The form asks for only actual age.
They are the same thing.
A

the form asks for both

81
Q 
There have been 45 sales in the subject neighborhood within the last 9 months. There are 35 properties currently listed for sale on the market. How many months' inventory is currently on the market?
5
7
9
11
A

7

82
Q

What is a reason why residential appraisers are often “form-focused”?
USPAP requires the use of forms
Most state appraisal boards mandate the use of forms
Forms have been standardized by Fannie Mae and Freddie Mac
Use of a form means the report is automatically USPAP-compliant

A

forms have been standardized by fannie mae and freddie mac

83
Q 
Each of the report options outlined in Standards Rule 2-2 (a) and (b) has \_\_\_ numbered minimum content requirement items.
12
10
9
13
A

12

Residential Report Writing and Case Studies (10 decks)

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