Chapter 8 disclosure of scope of work and assignment conditions

Question 1

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

Answer 1

scope of work

Question 2

Before an appraiser can determine an appropriate scope of work, he or she must first __________.
Know the amount of the appraisal fee
Determine how much time is allotted for assignment completion
Identify the problem
All of these

Answer 2

identify the problem

Question 3

The SCOPE OF WORK RULE provides flexibility to the appraiser, but along with that flexibility comes \_\_\_\_\_\_\_\_\_\_\_.
Inflexibility
Volatility
Violations
Responsibility

Answer 3

responsibility

Question 4

What is the idea behind the SCOPE OF WORK RULE?
Give appraisers the flexibility to treat each assignment differently
Make sure every appraisal assignment is handled in exactly the same way
Provide a maximum set of standards from which departure may be taken
Preserve the balance of USPAP if compliance is precluded by law or regulation

Answer 4

give the appraisers the flexibility to treat each assignment differently

Question 5

At first glance, there appear to be three options available to the appraiser regarding the inspection of the subject real property:

Answer 5

Interior and exterior inspection
Exterior-only inspection
No inspection

Question 6

What does Fannie Mae require, as a minimum, for an exterior-only inspection?
Fannie Mae does not permit exterior-only inspections of the subject property
A complete visual inspection of the interior and exterior areas of the subject property
The appraiser must view the exterior of the property from at least the street
Fannie Mae never requires a subject property inspection

Answer 6

the appraiser must view the exterior of the property from at least the street

Question 7

If you and your client have an understanding that you are making an interior inspection of the subject property:
There is still a need to disclose the extent of the inspection in the report
It is not necessary that the extent of the inspection be disclosed in the report, as long as it is noted in the workfile
This eliminates the need for disclaimers regarding the extent of inspection
all of these

Answer 7

there is still a need to disclose the extent of the inspection in the report

Question 8

The type and extent of an interior real property inspection will vary based on the intended use of the appraisal.
True
False

Answer 8

true

Question 9

With an appraisal based on an exterior-only inspection, the appraiser is faced with two disclosure tasks:

Answer 9

Disclose the extent of the inspection that was made, and

Disclose the source of information regarding the interior physical characteristics

Question 10

A lender client calls and requests a “drive-by” (exterior-only inspection) appraisal for a 40-acre parcel with a house and a small outbuilding, for a mortgage that is to be sold to Fannie Mae. The improvements are not visible from the road, but MLS reports the subject to be a brick two-story with a 20’ x 20’ barn. The MLS goes on to report the room count is 6 rooms, 3 bedrooms, 2 bathrooms, with 2,000 square feet, and that the subject is in good condition. The county records are in agreement, except they report the exterior siding to be wood frame.

Given the intended use and the client’s instructions, could you develop credible results? If not, what would you need to do? Are there any disclosures required?

Answer 10

The inspection cannot be called a “drive-by” if the appraiser cannot at least observe the exterior of the improvements. Fannie Mae requires that the appraiser be able to view the improvements. The discrepancy between the MLS and the county records regarding the exterior siding could be solved easily with a visual observation of the improvements. The appraiser must either change the scope of work (go onto the property to view the improvements) or discuss with the lender-client the possibility of completing the assignment with no inspection of the improvements.

To complete the appraisal and report it as an exterior inspection, when the appraiser was not able to view the improvements, would be considered misleading to the intended users.

Question 11

Irving is asked to complete a “drive-by” (exterior-only inspection) appraisal on a single-family home in a rural area for a Fannie Mae lender. When he drives out to the property, he realizes that it cannot be seen from the road. Which statement is TRUE regarding this situation?
He must be able to view the property in order to perform a “drive-by” appraisal.
He may employ a hypothetical condition to appraise the property “as if” he had actually viewed it.
He must withdraw from the assignment.
None of these

Answer 11

he must be able to view the property in order to perform a “drive-b” appraisal

Question 12

Don is asked by a prospective client to do an appraisal without making any inspection of the subject property. Don must ____________.
Inspect the property anyway, regardless of the client’s wishes
Be able to obtain sufficient reliable information about the subject property’s physical characteristics
Decline the assignment
Appraise the property using a hypothetical condition, which will permit him to presume otherwise uncertain information as fact

Answer 12

Be able to obtain sufficient reliable information about the subject property’s physical characteristics

Question 13

Bernie is completing an appraisal without an inspection of the subject property. Where in his report must he disclose that he did not inspect the property?
In the general description section
In the certification statement
He is not required to make this disclosure in the report, but it must be in the workfile
None of these

Answer 13

In the certification statement

Question 14

A tightening of underwriting standards in residential mortgage lending has led to clients asking for more information in appraisal reports than ever before.
True
False

Answer 14

true

Question 15

USPAP permits an appraiser may obtain competency during the performance of an assignment.
True
False

Answer 15

true

Question 16

If an appraiser receives significant real property appraisal assistance in an assignment, but does not disclose it in the report:
This is none of the client’s business
This is not a violation of USPAP
He has provided a misleading report
The appraiser has violated the JURISDICTIONAL EXCEPTION RULE

Answer 16

he has provided a misleading report

Question 17

assignment conditions are conditions that affect the

Answer 17

appraiser’s scope of work

Question 18

A specialty mortgage lender asks you to complete an appraisal on a 90-year-old house in a small town, on a 30’ x 120’ lot. This home is in mostly average condition. However, it has some deferred maintenance and the roof is nearing the end of its economic life.

The order form that was e-mailed to you states, “THE COST APPROACH IS REQUIRED ON ALL SINGLE-FAMILY HOME APPRAISALS: NO EXCEPTIONS!!!” You call the lender to ask if you can omit the approach on this particular appraisal, and you receive a somewhat snippy reply, “Can’t you read? Whatever it says on the order form is what you have to do.”

You complete the approach, using the best data you have. Your cost manual has little guidance for estimating cost new for a home with a cut stone foundation, knob and tube wiring, and real clapboard siding. Estimates of effective age and accrued depreciation are little more than guesses, because of lack of data. You were able to find site sales, but the most recent sale is four years old. In short, you have little faith in the value indicated by this approach.

What type of disclosure would you write in this situation?

Answer 18

Providing an unnecessary approach in a report is not misleading “if the appraiser properly addresses the applicability and suitability of the approach in the report.” An example of such a disclosure appears below:

The cost approach has been included solely at the request of the client. It was given no weight in arriving at the final opinion of value because of the difficulty in developing and supporting estimates of cost new and accrued depreciation. The subject improvements are 90 years old. There is limited data available with which to reliably develop this approach for a structure of this age, and therefore the results of this approach are not considered meaningful or relevant. The estimates of cost new, accrued depreciation, site value, as well as the value indicated by this approach, should not be relied upon by any party for any reason. Appraiser does not assume responsibility for misuse of data and conclusions by others.

Question 19

Assignment conditions would NOT include:
Jurisdictional exceptions
The appraisal fee
Extraordinary assumptions
Laws and regulations

Answer 19

the appraisal fee

Question 20

The \_\_\_\_\_\_\_\_\_\_\_\_ is intended as a "saving clause" which preserves the balance of USPAP if compliance with a part of USPAP is precluded by law or regulation.
SCOPE OF WORK RULE
COMPETENCY RULE
JURISDICTIONAL EXCEPTION RULE
Advisory Opinion

Answer 20

jurisdictional exception rule

Question 21

The current URAR form should NOT be used to report appraisals for non-mortgage lending intended uses.
True
False

Answer 21

true

Question 22

The type and extent of an interior real property inspection will vary based on \_\_\_\_\_\_\_\_\_\_\_\_ of the appraisal.
The intended use
Amount of time available
Client's instructions
None of the above

Answer 22

the intended use

Question 23

In order to be effective, scope of work disclosures:
Need not be lengthy or technical
Must appear in a separate, identified section of the report
Should comply with USPAP requirements for length and technical complexity
Should be written by an attorney

Answer 23

need not be lengthy or technical

Question 24

An appraiser needs to disclose the research and analyses that _______________ , but does NOT have to disclose the research and analyses that _______________.
Were promised, were performed
Were performed, were not performed
Were not performed, were performed
The client asked for, appraiser deemed necessary

Answer 24

were performed, were not performed

Question 25

Irving is asked to complete a “drive-by” (exterior-only inspection) appraisal on a single-family home in a rural area for a Fannie Mae lender. When he drives out to the property, he realizes that it cannot be seen from the road. Which statement is TRUE regarding this situation?
He must be able to view the property in order to perform a “drive-by” appraisal.
He may employ a hypothetical condition to appraise the property “as if” he had actually viewed it.
He must withdraw from the assignment.
None of these.

Answer 25

he must be able to view the property in order to perform a drive by appraisal

Question 26

The first step in the appraisal process is \_\_\_\_\_\_\_\_\_\_.
Collection of a retainer fee
Problem identification
Determination of scope of work
Report on the opinion of value

Answer 26

problem identification

Question 27

The SCOPE OF WORK RULE provides flexibility to the appraiser, but along with that flexibility comes \_\_\_\_\_\_\_\_\_\_\_.
Inflexibility
Volatility
Violations
Responsibility

Answer 27

responsibility

Question 28

The SCOPE OF WORK RULE essentially states:
If a law or regulation precludes compliance with a part of USPAP, the law or regulation takes precedence
The same amount of work must be completed in every appraisal assignment
An appraiser is required to complete only the work necessary to produce credible results for the assignment
An appraiser who has limited time to complete the assignment may omit certain steps in the valuation process, as long as this is disclosed

Answer 28

an appraiser is required to complete only the work necessary to produce credible results for the assignment

Question 29

If a client asks an appraiser not to develop the cost approach in an assignment, the appraiser does not need to explain the omission of the cost approach in the report, because the client is already aware of the omission.
True
False

Answer 29

false

Omitting an approach to value requires a disclosure and explanation. It does not matter whose decision it was – the appraiser’s or the client’s.

Question 30

Eric develops an appraisal without making any inspection of the subject property. What are his disclosure obligations?
He must disclose in the report certification that he did not make an inspection of the subject property
His disclosure that he did not inspect the property may appear anywhere in the report
He must disclose that he made an exterior-only inspection of the property
He must disclose the fact that he violated USPAP by not making an inspection of the property

Answer 30

He must disclose in the report certification that he did not make an inspection of the subject property

Question 31

In the appraisal report, a disclosure clarifying the extent of the inspection can provide additional information to intended users, and may also \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
Be in violation of USPAP
Save time and/or money
Limit the appraiser’s liability
None of these

Answer 31

limit the appraiser’s liability