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USPAP 2020-2021 > Chapter 7 > Flashcards

Chapter 7 Flashcards

1
Q

The basic requirements for developing a real property appraisal are presented in

A

Standard 1

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2
Q

How many standard rules in Standard 1?

A

6

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3
Q

What topic does Standard 1 cover?

A

The appraisal process.

This includes the standard rules for developing an opinion of value or an appraisal review opinion and is generally similar to all areas of appraisal practice

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4
Q

Requirements that are SPECIFIC to the DEVELOPMENT of rREAL PROPERTY APPRAISAL assignments are found in

A

Standard 1

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5
Q

The requirements of STANDARD 1 can be used as a checklist by an appraiser who is developing a real property appraisal. True or False.

A

True

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6
Q

Which statement is FALSE regarding STANDARD 1?
It mirrors the appraisal process.

It covers real and personal property appraisal development.
It contains six Standards Rules.
It can be used as a checklist for proper development.

A

It covers real and personal property appraisal development

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7
Q

Standards Rule 1-1 is labeled as the

A

General Development Requirements

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8
Q

General Development Requirements elaborates on

A

requirements that are set forth in the COMPETENCY RULE.

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9
Q

The 3 parts of Standards Rule 1-1

A
  1. be aware of, understand, and correctly employ those recognized methods and techniques that are necessary to produce a credible appraisal.
  2. not commit a substantial error of omission or commission that significantly affects an appraisal
  3. not render appraisal services in a careless or negligent manner, such as by making a series of errors that, although individually might not significantly affect the results of an appraisal, in the aggregate affects the credibility of those results.
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10
Q

Standards Rule 1-2 is labeled

A

“Problem Identification”

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11
Q

Standards 1-2a states:

A

identify the client and other intended users.

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12
Q

Advisory Opinion 36 is titled

A

Identification and Disclosure of Client, Intended Use, and Intended Users.

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13
Q

An appraiser’s client wishes to remain anonymous, and asks the appraiser not to include client’s identity in an appraisal report. What should the appraiser do?
Withdraw from the assignment
Identify the client by an alias in the report
Omit the client’s identity from the report but document the client’s identity in the workfile
Insist on including the client’s identity in the report against the client’s wishes

A

Omit the client’s identity from the report but document the client’s identity in the workfile

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14
Q

If a mortgage borrower receives a copy of an appraisal report from a mortgage lender as a result of disclosure requirements:

The borrower is now considered an intended user under USPAP
This is an illegal act by the lender, who is subject to prosecution
The appraiser can void the appraisal at his/her discretion
This does not make the borrower an intended user

A

This does not make the borrower the intended user

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15
Q

When does a series of minor errors potentially result in a USPAP violation?
When the errors were made by a trainee assisting the appraiser
When the series of errors affects the credibility of the results
When the client has to request corrections from the appraiser after the report has been completed
When there are more than 3 such errors in the report

A

When the series of errors affects the credibility of the results

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16
Q

Standards Rule 1-2(b) States:

A

An appraiser must:

identify the intended use of the appraiser’s opinions and conclusions.

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17
Q

Standards Rule 1-2(c) states an appraiser must:

A

identify the type and definition of value, and, if the value opinion to be developed is market value, ascertain whether the value is to be the most probable price:

(i) in terms of cash; or
(ii) in terms of financial arrangements equivalent to cash; or
(iii) in other precisely defined terms; and
(iv) if the opinion of value is to be based on non-market financing or financing with unusual conditions or incentives, identify the terms of such financing and any influences on value;

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18
Q

Advisory Opinion 35 is titled

A

Reasonable Exposure Time in Real Property and Personal Property Opinions of Value.

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19
Q

AO-35 provides elaboration on the concept of reasonable exposure time. Specifically, it answers the questions:

A

How is the opinion of reasonable exposure time developed? Is it presumed to occur prior to or starting from the effective date of the appraisal?

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20
Q

Definition of Exposure Time:

A

an opinion, based on supporting market data, of the length of time that the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal.

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21
Q 
Exposure time is:
A fact to be found
Not required to be reported
An opinion developed by an appraiser
Unnecessary in most appraisal assignments
A

An opinion developed by the appraiser

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22
Q

Which statement is TRUE regarding exposure time?
It is necessary in all appraisal assignments.
It is always assumed to begin on the effective date of the appraisal and extend out into the future.
It is always assumed to precede the effective date of the appraisal.

A

It is always assumed to precede the effective date of the appraisal

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23
Q

Standards Rule 1-2(d) states an appraiser must:

A

identify the effective date of the appraiser’s opinions and conclusions.

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24
Q

Standards Rule 1-2(e) states that an appraiser must:

A

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, including:

(i) its location and physical, legal, and economic attributes;
(ii) the real property interest to be valued;
(iii) any personal property, trade fixtures, or intangible items that are not real property but are included in the appraisal;
(iv) any known easements, restrictions, encumbrances, leases, reservations, covenants, contracts, declarations, special assessments, ordinances, or other items of a similar nature; and
(v) whether the subject property is a fractional interest, physical segment, or partial holding

25
Q

Advisory Opinion 2 is titled

A

Inspection of the Subject Property. It applies to real property and personal property.

26
Q

Advisory Opinion 17 is titled

A

Appraisals with Proposed Improvements. It applies to the appraisal of real property only.

27
Q

Advisory Opinion 23 is titled

A

Identifying the Relevant Characteristics of the Subject Property, and it applies to real property appraisal.

28
Q

What is the primary purpose of an appraiser making an inspection of the subject property?
To prove to the client that the appraiser knows the property
To collect information about characteristics that are relevant to value
To meet the USPAP requirement that all subject properties be inspected
All of the answers listed

A

To collect information about charactersitics that are relevant to value

29
Q

An example of a relevant property characteristic that could affect a real property appraisal assignment would be:
The type of report requested by the client
The amount of time that is given for the appraiser to complete the assignment
The fact that the subject property is affected by an easement

A

The fact that the subject property is affected by an easement

30
Q

When appraising a property with proposed improvements, what type of value opinion is permitted by USPAP?
A current value only
A prospective value only
Both current and prospective values

A

Both current and prospective values

31
Q

Standards Rule 1-2 (f) states that an appraiser must:

A

identify any extraordinary assumptions necessary in the assignment. An extraordinary assumption may be used in an assignment only if:

(i) the extraordinary assumption is required to properly develop credible opinions and conclusions;
(ii) the appraiser has a reasonable basis for the extraordinary assumption; and
(iii) use of the extraordinary assumption results in a credible analysis;

32
Q

Standards Rule 1-2 (g) states that an appraiser must:

A

identify any hypothetical conditions necessary in the assignment. A hypothetical condition may be used in an assignment only if:

(i) use of the hypothetical condition is clearly required for legal purposes, for purposes of reasonable analysis, or for purposes of comparison; and
(ii) use of the hypothetical condition results in a credible analysis;

33
Q 
An extraordinary assumption may be used in an assignment only if:
Approved by the client
Accompanied by a limiting condition
Mandated by law or regulation
Required to develop credible results
A

Required to develop credible results

34
Q 
When an appraiser provides a current value opinion on a proposed new building, he or she is utilizing a(an) \_\_\_\_\_\_\_\_\_\_\_\_\_ that the proposed improvements are completed as of the effective date of the appraisal.
Hypothetical condition
Extraordinary assumption
Unethical contingency
Limiting condition
A

Hypothetical Condition

35
Q

The Standards Rule 1-2(h) requires an appraiser to:

A

determine the scope of work necessary to produce credible assignment results in accordance with the SCOPE OF WORK RULE

36
Q

Advisory Opinion 19 is titled

A

Unacceptable Assignment Conditions in Real Property Appraisal Assignments.

37
Q

An unacceptable assignment condition would be a condition that:

Precludes an appraiser’s impartiality
All of the answers listed
Limits report content, resulting in a misleading report
Limits the scope of work to the extent that the value opinion is not credible

A

All of the answers listed

38
Q

Standards Rule 1-3 is labeled

A

Market Analysis and Highest and Best Use.

39
Q

Standards Rule 1-4 sets forth requirements for the

A

sales comparison, cost, and income approaches in real property appraisals.

40
Q

Standards Rule 1-4(a) relates to the sales comparison approach:

A

When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data as are available to indicate a value conclusion.

41
Q

Standards Rule 1-4(b) relates to the cost approach:

A

When a cost approach is necessary for credible assignment results, an appraiser must:

(i) develop an opinion of site value by an appropriate appraisal method or technique;
(ii) analyze such comparable cost data as are available to estimate the cost new of the improvements (if any); and
(iii) analyze such comparable data as are available to estimate the difference between the cost new and the present worth of the improvements (depreciation).

42
Q

Standards Rule 1-4(c) relates to the income approach:

A

When an income approach is necessary for credible assignment results, the appraiser must:

(i) analyze such comparable rental data as are available and/or the potential earnings capacity of the property to estimate the gross income potential of the property;
(ii) analyze such comparable operating expense data as are available to estimate the operating expenses of the property;
(iii) analyze such comparable data as are available to estimate rates of capitalization and/or rates of discount;
(iv) base projections of future rent and/or income potential and expenses on reasonably clear and appropriate evidence; and
(v) weigh historical information and trends, current supply and demand factors affecting such trends, and anticipated events such as competition from developments under construction, when developing income and expense statements and cash flow projections.

43
Q

When developing a sales comparison approach under USPAP:
Guidelines for time and distance specified by SR 1-4 must be followed
The appraiser must consider at least three comparable sales
The appraiser must analyze such data as are available to indicate a value conclusion

A

The appraiser must analyze such data as are available to indicate a value conclusion

44
Q

Which statement is TRUE regarding USPAP and the three approaches to value?
USPAP requires specific methodology for developing the cost and income approaches, but not the sales comparison approach.
An appraiser must develop all three approaches to value in every appraisal assignment.
An assignment condition may require an appraiser to develop an approach that he or she would otherwise consider unnecessary.
USPAP requires that at least two of the three approaches be developed in every appraisal assignment.

A

An assignment condition may require an appraiser to develop an approach that he or she would otherwise consider unnecessary.

45
Q

Standards Rule 1-4(d) states:

A

When developing an opinion of the value of a leased fee estate or a leasehold estate, an appraiser must analyze the effect on value, if any, of the terms and conditions of the lease(s).

46
Q

Standards Rule 1-4(e) states:

A

When analyzing the assemblage of the various estates or component parts of a property, an appraiser must analyze the effect on value, if any, of the assemblage. An appraiser must refrain from valuing the whole solely by adding together the individual values of the various estates or component parts.

47
Q

Standards Rule 1-4(f) addresses anticipated public or private improvements:

A

When analyzing anticipated public or private improvements, located on or off the site, an appraiser must analyze the effect on value, if any, of such anticipated improvements to the extent they are reflected in market actions.

48
Q

Standards Rule 1-4 (g) addresses the situation when non-real property items are included in a real property appraisal:

A

When personal property, trade fixtures, or intangible items are included in the appraisal, the appraiser must analyze the effect on value of such non-real property assets.

49
Q

Standards Rule 1-5 is titled Sale Agreements, Options, Listings, and Prior sales:

A

When the opinion of value to be developed is market value, an appraiser must, if such information is available to the appraiser in the normal course of business:

(a) analyze all agreements of sale, options, and listings of the subject property current as of the effective date of the appraisal; and
(b) analyze all sales of the subject property that occurred within the three (3) years prior to the effective date of the appraisal.

50
Q

Advisory Opinion 1 is titled

A

Sales History, and it is applicable in real property appraisals.

51
Q

Advisory Opinion 24 is titled

A

Normal Course of Business. It is applicable to both real and personal property appraisal.

52
Q

When analyzing the subject property’s sales history in a real property appraisal assignment, an appraiser is required by USPAP to analyze ______________.
Prior sales of both the subject and comparable properties
The most recent sale of the subject property, regardless of when it occurred
All sales of the subject property that occurred within three years prior to the effective date of the appraisal
Only the most recent sale of the subject property, if it occurred within the last three years

A

All sales of the subject property that occurred within three years prior to the effective date of the appraisal

53
Q

When analyzing listings of the subject property in a real property appraisal assignment, USPAP requires an appraiser to analyze, at a minimum, ____________.
Current listings
All listings that occurred within the last year
All listings that occurred within the last three years

A

Current listings

54
Q

Standards Rule 1-6 is titled

A

Reconciliation.

55
Q

Standards Rule 1-6 states:

A

In developing a real property appraisal, an appraiser must:

(a) reconcile the quality and quantity of data available and analyzed within the approaches used; and
(b) reconcile the applicability and relevance of the approaches, methods and techniques used to arrive at the value conclusion(s).

56
Q

The process of reconciliation entails ___________.
Averaging the indicated values to arrive at a final value opinion
Changing the adjustments to bring the indicated values into a tighter range
Careful consideration of the quality and quantity of data
Complying with a client’s request to find additional comparable sales that support the appraiser’s opinion of value

A

Careful consideration of the quality and quantity of data

57
Q

When is it necessary to analyze prior listings of the subject property in a real property appraisal assignment?
In all appraisal assignments, regardless of property type
Only in the appraisal of non-residential real property
When such analysis is relevant to the current assignment
Only in real property appraisal assignments

A

When such analysis is relevant to the current assignment

58
Q

In the development of an appraisal, the appraiser is required to:
Not commit a substantial error that significantly affects the appraisal
Make a personal inspection of the subject property
Inspect the comparable sales by at least driving by them
Use all three approaches to value

A

Not commit a substantial error that significantly affects the appraisal

USPAP 2020-2021 (14 decks)

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