Certified Appraisal Reviewer (CAR) — Questions and Answers

Question 1: A reviewer determines that an appraiser failed to consider a significant adverse easement affecting the subject property. This is most likely a deficiency in which part of the appraisal process?

Data collection and property description (Correct answer)
Selection of comparable sales
Reconciliation of value indicators
Final value conclusion

Correct answer: Data collection and property description

Failing to identify and describe a significant easement is a failure in data collection and property description, which forms the foundation of the appraisal analysis.

Question 2: Which skill is most important for success in Foundational Concepts & Principles within Certified Appraisal Reviewer?

Working without any training
Continuous learning and adaptation (Correct answer)
Resisting change
Avoiding feedback

Correct answer: Continuous learning and adaptation

Continuous learning ensures professionals stay current with evolving practices in Foundational Concepts & Principles.

Question 3: A state-certified review appraiser completes an appraisal review that is later found to violate USPAP. Who bears primary responsibility?

The review appraiser who performed and signed the review (Correct answer)
The supervisory appraiser if one was involved
The original appraiser whose work was reviewed
The client who ordered the review

Correct answer: The review appraiser who performed and signed the review

The review appraiser who signs the certification is personally responsible for compliance with USPAP, regardless of client instructions or the original appraiser's conduct.

Question 4: Under the Dodd-Frank Act, which entity is prohibited from coercing an appraiser to reach a predetermined value on a consumer mortgage transaction?

Only the loan officer
Any covered person, including lenders, servicers, and AMCs (Correct answer)
Only the mortgage broker
Only the settlement agent

Correct answer: Any covered person, including lenders, servicers, and AMCs

Dodd-Frank Section 1472 prohibits any covered person — including lenders, servicers, appraisal management companies, and real estate agents — from coercing appraisers.

Question 5: In reviewing a complex commercial appraisal, the reviewer disagrees with the appraiser's value conclusion. Under USPAP Standard 3, the reviewer may:

Refuse to issue a review report unless the appraiser changes the value
Issue a review report that includes the reviewer's own value opinion if necessary (Correct answer)
Require the appraiser to reperform the appraisal under the reviewer's supervision
Only report the disagreement verbally to the client

Correct answer: Issue a review report that includes the reviewer's own value opinion if necessary

USPAP Standard 3 permits (and sometimes requires) the reviewer to provide their own value opinion in the review report when disagreeing with the appraiser's conclusion.

Question 6: What is the purpose of an engagement letter in a review assignment?

It defines the scope of work, deliverables, fees, and assignment conditions to protect both the reviewer and client (Correct answer)
It certifies that the reviewer has inspected the subject property
It substitutes for the review report when the client waives the written report requirement
It authorizes the reviewer to access the original appraiser's workfile

Correct answer: It defines the scope of work, deliverables, fees, and assignment conditions to protect both the reviewer and client

An engagement letter establishes a mutual understanding of the assignment's parameters, reducing disputes about scope, deliverables, and liability boundaries.

Question 7: A reviewer working for a financial institution is asked to review an appraisal for a portfolio loan. Which interagency guidance most directly governs the institution's appraisal review requirements?

State real estate commission regulations for licensed appraisers
Fannie Mae Selling Guide requirements exclusively
HUD Handbook 4000.1 for all residential transactions
The Interagency Appraisal and Evaluation Guidelines issued by federal banking regulators (Correct answer)

Correct answer: The Interagency Appraisal and Evaluation Guidelines issued by federal banking regulators

The Interagency Appraisal and Evaluation Guidelines, issued by the OCC, Fed, FDIC, NCUA, and CFPB, govern appraisal review standards for federally regulated financial institutions.

Question 8: In a desk review, the reviewer evaluates the appraisal report without performing a property inspection. Under USPAP, this is acceptable when the reviewer does which of the following?

Obtains verbal confirmation of the property condition from the borrower
Clearly identifies the scope of work, including the lack of inspection, in the review report (Correct answer)
Certifies the property was personally inspected
Relies solely on the original appraiser's property description

Correct answer: Clearly identifies the scope of work, including the lack of inspection, in the review report

USPAP requires the reviewer to identify the scope of work actually performed; disclosing that no inspection occurred satisfies this requirement.

Question 9: What is the legal significance of the Uniform Standards of Professional Appraisal Practice (USPAP) in US appraisal law?

USPAP applies only to appraisers working on federally backed mortgages
USPAP is a voluntary industry standard with no legal enforcement mechanism
Many states have adopted USPAP by statute or regulation, making compliance legally mandatory for licensed and certified appraisers (Correct answer)
USPAP requirements supersede all state licensing laws when they conflict

Correct answer: Many states have adopted USPAP by statute or regulation, making compliance legally mandatory for licensed and certified appraisers

FIRREA requires state licensing programs to meet or exceed USPAP, and most states incorporate USPAP into their appraisal laws, giving it legal force for licensed and certified appraisers.

Question 10: A lender's chief appraiser asks a reviewer to change a review conclusion to make a loan eligible for purchase by a government-sponsored enterprise. How should the reviewer respond?

Comply only if the change is less than 5% of the original appraised value
Comply if the request is made in writing and documented in the workfile
Refer the matter to the AMC and take no further action
Refuse, as changing a professional conclusion due to pressure violates USPAP appraiser independence requirements (Correct answer)

Correct answer: Refuse, as changing a professional conclusion due to pressure violates USPAP appraiser independence requirements

USPAP prohibits any party from influencing an appraiser or reviewer to provide a misleading opinion, and reviewers must maintain independence regardless of business pressure.

Question 11: What is the primary purpose of an appraisal report evaluation?

To ensure accuracy and compliance (Correct answer)
To increase asset values
To create subjective pricing
To eliminate the need for valuation methods

Correct answer: To ensure accuracy and compliance

Appraisal report evaluation ensures accuracy, compliance with standards, and reliability of valuation conclusions.

Question 12: What is the primary objective of a valuation analysis?

To estimate asset appreciation arbitrarily
To set government tax rates
To inflate asset values artificially
To determine fair market value (Correct answer)

Correct answer: To determine fair market value

Valuation analysis determines the fair market value of an asset by considering various influencing factors.

Question 13: An appraisal review report must clearly identify:

The work under review, the reviewer's scope of work, and the reviewer's opinion of the work quality (Correct answer)
Only the reviewer's value conclusion
The appraiser's licensing status and disciplinary history
The client's intended use and the reviewer's certification number only

Correct answer: The work under review, the reviewer's scope of work, and the reviewer's opinion of the work quality

Per USPAP Standard 4, the review report must identify the work under review, the reviewer's scope, and the reviewer's opinion regarding the work reviewed.

Question 14: In a review report, the 'extraordinary assumption' must be:

Disclosed only in the addendum and not the certification
Limited to assumptions about physical property characteristics only
Omitted if the reviewer considers it unlikely to affect the outcome
Clearly stated, with its potential impact on the review conclusion noted (Correct answer)

Correct answer: Clearly stated, with its potential impact on the review conclusion noted

Extraordinary assumptions must be clearly disclosed and the reviewer must indicate their potential impact on the review conclusion.

Question 15: When reviewing an appraisal in a declining market, which reviewer action best mitigates the risk of an overstated value?

Accepting the appraiser's market conditions adjustment if it is positive
Verifying that the appraiser applied a negative time adjustment to reflect falling prices (Correct answer)
Confirming that the appraiser used only the most recent comparable sales within 30 days
Ensuring the appraiser used the income approach as the primary approach

Correct answer: Verifying that the appraiser applied a negative time adjustment to reflect falling prices

A negative market conditions adjustment is essential in declining markets; without it, older comparable sales overstate the current market value.

Question 16: What is the role of documentation in Foundational Concepts & Principles for Certified Appraisal Reviewer?

It is unnecessary paperwork
It is only for management review
It should only be done monthly
It provides an accurate record for accountability and reference (Correct answer)

Correct answer: It provides an accurate record for accountability and reference

Proper documentation in Foundational Concepts & Principles ensures accountability, traceability, and serves as a reference for future decisions.

Question 17: Which term describes the total bundle of legal rights associated with real property ownership, including the right to use, sell, lease, or exclude others?

Fee simple estate
Easement appurtenant
Bundle of rights (Correct answer)
Leasehold interest

Correct answer: Bundle of rights

The 'bundle of rights' concept describes all legal rights that flow from property ownership, and appraisers must identify which rights are being valued in each assignment.

Question 18: Which approach is commonly used to value income-generating properties?

Cost approach
Market trending approach
Sales comparison approach
Income approach (Correct answer)

Correct answer: Income approach

The income approach evaluates the present value of future cash flows to determine an asset’s value.

Question 19: Under USPAP's Scope of Work Rule, who bears the primary responsibility for determining the appropriate scope of work for an appraisal assignment?

The appraisal reviewer
The client who ordered the appraisal
The intended user of the appraisal report
The appraiser (Correct answer)

Correct answer: The appraiser

USPAP's Scope of Work Rule places the primary responsibility on the appraiser to identify the problem and determine the appropriate scope of work to produce credible results.

Question 20: A reviewer notes that an appraisal report's effective date is six months prior to the date of the review, and market conditions have changed significantly. The reviewer should:

Update the appraisal to reflect current conditions
Average the original value with a current market estimate
Require a new appraisal automatically
Note that the original value conclusion is as of the original effective date and assess whether the report was credible as of that date (Correct answer)

Correct answer: Note that the original value conclusion is as of the original effective date and assess whether the report was credible as of that date

The reviewer evaluates the original report's credibility as of its effective date; market changes since then do not retroactively make the original report deficient.

Question 21: An appraiser values a 10-unit apartment building using a gross rent multiplier (GRM) of 12, derived from three comparable sales. A reviewer's concern about this approach is that the GRM:

Is only valid when derived from properties in the same zip code
Must equal the reciprocal of the capitalization rate
Cannot be applied to apartment buildings under any circumstances
Does not account for differences in operating expenses between properties (Correct answer)

Correct answer: Does not account for differences in operating expenses between properties

GRM is a crude measure because it ignores vacancy, operating expenses, and expense ratios, which can vary widely among comparable properties.

Question 22: A reviewer is evaluating whether an appraiser appropriately identified a property's extraordinary assumption. Which scenario requires an extraordinary assumption?

The property has a standard 30-year mortgage encumbrance
The subject is a single-family home in a stable residential neighborhood
The appraiser used a sales comparison approach with three recent sales
The value is based on a proposed renovation that has not yet been completed (Correct answer)

Correct answer: The value is based on a proposed renovation that has not yet been completed

An extraordinary assumption must be identified when the value opinion is based on information that, if incorrect, would materially affect the conclusion—such as a renovation not yet complete.

Question 23: When a CAR review appraiser signs a certification in an appraisal review report, they are certifying that:

The original appraiser's value conclusion is correct
All comparable sales were personally verified by the reviewer
The subject property has been physically inspected by the reviewer
The reviewer's opinions and conclusions are their own and free from bias (Correct answer)

Correct answer: The reviewer's opinions and conclusions are their own and free from bias

The USPAP certification in a review report confirms that the reviewer's opinions are their own, unbiased, made in good faith, and comply with USPAP requirements.

Question 24: In reviewing a manufactured home appraisal, the reviewer notices the appraiser used site-built comparables without explanation. This is problematic primarily because:

Manufactured home values are always determined solely by the cost approach
USPAP prohibits manufactured home appraisals from using any site-built comparables
Manufactured homes always have lower land values than site-built homes
Market participants typically view manufactured and site-built homes as distinct product types, and mixing them without adjustment or explanation undermines credibility (Correct answer)

Correct answer: Market participants typically view manufactured and site-built homes as distinct product types, and mixing them without adjustment or explanation undermines credibility

Manufactured and site-built homes appeal to different market segments and may command different prices, so using site-built comparables without addressing the difference and making appropriate adjustments weakens the appraisal.

Question 25: When reviewing a residential appraisal, a reviewer notices the appraiser used three comparables all located in a subdivision that is considerably newer and superior to the subject's neighborhood. This raises concerns about:

The appraiser exceeding the maximum allowable number of comparables
Whether the GLA measurements were performed correctly
Compliance with the Equal Credit Opportunity Act
Whether the comparables represent the same competitive market as the subject (Correct answer)

Correct answer: Whether the comparables represent the same competitive market as the subject

Comparables should compete with the subject in the same or similar market; using comparables from a clearly superior neighborhood can result in upward-biased adjustments and an unreliable value conclusion.

Question 26: What is a fundamental principle of Advanced Techniques & Methods in Certified Appraisal Reviewer practice?

Using outdated methods
Ignoring industry guidelines
Working in isolation without guidance
Following established standards and best practices (Correct answer)

Correct answer: Following established standards and best practices

Following established standards and best practices ensures quality and consistency in Advanced Techniques & Methods.

Question 27: What is the primary purpose of an appraisal review as defined by USPAP Standard 3?

To provide a new independent appraisal of the subject property
To determine the highest and best use of the subject property independently
To develop and communicate an opinion about the quality of another appraiser's work (Correct answer)
To audit the appraiser's compliance with state licensing requirements

Correct answer: To develop and communicate an opinion about the quality of another appraiser's work

Standard 3 defines appraisal review as the act or process of developing and communicating an opinion about the quality of another appraiser's work.

Question 28: A borrower refinances a property that appraised at $500,000. The reviewer finds the appraiser selected comparables that sold 14 months ago with no time adjustment in a market with documented 1% monthly appreciation. The adjusted comparables should each be approximately how much higher?

1% higher
28% higher
14% higher (Correct answer)
7% higher

Correct answer: 14% higher

A 1% monthly appreciation rate over 14 months compounds to approximately 14%, meaning comparable sale prices should be adjusted upward by roughly 14% to reflect current market conditions.

Question 29: When a reviewer develops an opinion of value as part of an appraisal review, this opinion must be:

Developed in compliance with USPAP Standards 1 and 2 in addition to Standards 3 and 4 (Correct answer)
Developed only if the original value is more than 10% different from market expectations
Limited to confirming or rejecting the original appraiser's value
Based solely on the appraiser's data without independent research

Correct answer: Developed in compliance with USPAP Standards 1 and 2 in addition to Standards 3 and 4

If a reviewer develops their own value opinion, they must comply with both the appraisal development standard (Standard 1) and the review standards (Standards 3 and 4).

Question 30: Under the Homeowners Protection Act (HPA), at what loan-to-value ratio must a lender automatically cancel borrower-paid private mortgage insurance (PMI) on a residential mortgage?

80% LTV based on the current appraised value
78% LTV based on the original amortization schedule (Correct answer)
90% LTV once the borrower requests cancellation in writing
85% LTV when the property has appreciated sufficiently

Correct answer: 78% LTV based on the original amortization schedule

The HPA mandates automatic PMI termination when the principal balance reaches 78% of the original purchase price or appraised value at origination, based on scheduled amortization.

Question 31: An appraiser's certification in a USPAP-compliant report states assumptions and limiting conditions. In a review, a critical limiting condition that materially affects credibility should be:

Noted as a potential deficiency if it limits the report's intended use (Correct answer)
Automatically grounds for rejection of the appraisal
Accepted as standard practice without comment
Reported only to the state licensing board

Correct answer: Noted as a potential deficiency if it limits the report's intended use

A limiting condition that materially impairs the report's usefulness for its intended purpose should be flagged as a potential deficiency in the review.

Question 32: A reviewer who simultaneously works as a loan officer for the same bank that ordered the appraisal review faces which primary ethical concern?

Confidentiality
Competency
Scope of work
Conflict of interest (Correct answer)

Correct answer: Conflict of interest

Holding dual roles where the reviewer's financial interest in the loan outcome could influence the review conclusion creates a direct conflict of interest under USPAP's Ethics Rule.

Certified Appraisal Reviewer (CAR)

The CAR credential, awarded by the National Association of Appraisers, validates expertise in reviewing real property appraisal reports for compliance, credibility, and conformance with USPAP standards. It covers appraisal principles, report analysis, property valuation methodology, market analysis, and legal/regulatory requirements.

100

Questions

120 min

Time Limit

70%

To Pass

Checking for saved progress...

Exam Rules

You can skip questions and return to them later
Flag questions for review before submitting
No feedback shown until you submit the entire exam
Unanswered questions count as wrong — answer everything
10 pretest questions are mixed in and don't affect your score
Timer auto-submits when time runs out
Your progress is auto-saved every 30 seconds