ARA Regulatory Compliance & Legal Framework 3 — Questions and Answers
Question 1: Under the Uniform Standards of Professional Appraisal Practice, which Standard governs the development of a real property appraisal?
- Standard 1 (Correct answer)
- Standard 3
- Standard 5
- Standard 7
Correct answer: Standard 1
USPAP Standard 1 governs the development of real property appraisals, while Standard 2 governs the reporting of those appraisals.
Question 2: A rural property owner claims an access easement across a neighboring parcel exists by prescription. How should the ARA appraiser treat this claim?
- Accept the claim at face value and include the easement benefit in the value conclusion
- Ignore unrecorded easements since they are legally unenforceable
- Note the claim, recommend a legal determination, and analyze the effect on value under reasonable assumptions (Correct answer)
- Refuse to complete the appraisal until the easement is legally resolved
Correct answer: Note the claim, recommend a legal determination, and analyze the effect on value under reasonable assumptions
Appraisers identify legal issues affecting value, may rely on extraordinary assumptions where legal status is uncertain, and recommend that clients seek legal counsel to resolve title matters.
Question 3: Which federal law prohibits discrimination in residential mortgage lending based on race, color, national origin, religion, sex, familial status, or disability, directly affecting how appraisers must approach their work?
- The Community Reinvestment Act
- The Fair Housing Act (Correct answer)
- The Equal Credit Opportunity Act
- The Home Mortgage Disclosure Act
Correct answer: The Fair Housing Act
The Fair Housing Act prohibits discriminatory practices in housing transactions, and appraisers must not allow protected class characteristics of a neighborhood to influence value conclusions.
Question 4: When appraising agricultural land subject to a conservation easement, the appraiser should:
- Appraise only the fee simple interest and disregard the easement
- Identify the easement as a property right restriction and appraise the encumbered fee interest reflecting easement terms (Correct answer)
- Value the property as if no easement exists and add a separate easement line-item deduction
- Decline the assignment because conservation easements are outside USPAP scope
Correct answer: Identify the easement as a property right restriction and appraise the encumbered fee interest reflecting easement terms
A conservation easement restricts the property rights conveyed; USPAP requires the appraiser to identify the property rights being appraised and reflect all legal encumbrances in the value conclusion.
Question 5: State appraiser licensing laws, in order to conform with FIRREA requirements, must include which minimum element?
- A mandatory fee schedule set by the state legislature
- Adoption of USPAP as the minimum standard for appraisals in federally related transactions (Correct answer)
- A prohibition on out-of-state appraisers obtaining temporary practice permits
- Mandatory peer review of all appraisals within 90 days of completion
Correct answer: Adoption of USPAP as the minimum standard for appraisals in federally related transactions
FIRREA requires state appraiser regulatory programs to adopt USPAP as the minimum standard for appraisals in federally related transactions as a condition of ASC recognition.
Question 6: An appraiser accepts an assignment contingent on the property appraising at a value sufficient to close the loan. Under USPAP, this arrangement is:
- Permissible if disclosed in the certification
- A prohibited contingent fee arrangement that violates the Ethics Rule (Correct answer)
- Acceptable only for non-federally related transactions
- Allowed if the appraiser and lender have a pre-existing business relationship
Correct answer: A prohibited contingent fee arrangement that violates the Ethics Rule
USPAP's Ethics Rule explicitly prohibits accepting an assignment where the fee is contingent on a predetermined result, direction of value, or the outcome of any subsequent transaction.
Question 7: Which regulatory body issues the Uniform Appraisal Dataset (UAD) requirements that standardize fields in residential appraisal report forms?
- The Appraisal Foundation
- Fannie Mae and Freddie Mac (Correct answer)
- The Federal Reserve Board
- The Appraisal Subcommittee
Correct answer: Fannie Mae and Freddie Mac
Fannie Mae and Freddie Mac jointly developed and issue the UAD requirements, which standardize data entry in URAR and other residential appraisal forms submitted to them.
ARA Regulatory Compliance & Legal Framework 3
Under the Uniform Standards of Professional Appraisal Practice, which Standard governs the development of a real property appraisal?