Appraising (SAFE EXAM)

Appraisal

An unbiased professional opinion of a property's value, typically used in mortgage lending to determine the collateral value for a loan.

What regulation sets the ethical and performance standards for appraisers?

Uniform Standards of Professional Appraisal Practice (USPAP)

Appraiser

A licensed professional qualified to assess property value using USPAP standards

Dodd-Frank Act requires appraiser to…

be independent and prohibits influence by lenders.

Market Approach

A valuation method comparing the subject property to similar properties recently sold in the area, adjusting for differences.

An appraiser uses the recent sale prices of nearby homes to value a property. Which approach is this?

Market Approach

Income Approach

A valuation method based on the property’s ability to generate income, commonly used for investment or rental properties.

What type of property typically uses the income approach for valuation?

Rental or commercial properties.

Cost Approach

A valuation method determining the value based on the cost to replace or reproduce the property minus depreciation.

An appraiser calculates a property’s value by estimating replacement costs and subtracting depreciation.

Cost Approach

Appraisal Independence

Ensures that appraisers operate without undue influence from lenders, ensuring objective property valuations.

A lender asks an appraiser to revise a report to meet the borrower’s requested value. Is this allowed?

No, this violates appraisal independence rules under Dodd-Frank.

Uniform Residential Appraisal Report (URAR)

Standardized form (Form 1004) used for appraisals of single-family homes, ensuring consistency in valuation reporting.

What is the primary appraisal form used for single-family residential properties?

Uniform Residential Appraisal Report (URAR).

Reconsideration of Value (ROV)

A formal request for the appraiser to re-evaluate the property value due to additional information or perceived inaccuracies.

A borrower disputes an appraisal, citing incorrect square footage. What process might they request?

Reconsideration of Value (ROV).

Appraisal Management Company (AMC)

Third-party companies that manage the appraisal process, including hiring appraisers and ensuring independence.

Dodd-Frank Act: Regulates AMCs to prevent

lender influence on appraisers.

What is the role of an AMC in the appraisal process?

To hire appraisers and ensure compliance with appraisal independence requirements.