CAR Appraisal Reviewer Report Analysis 3 — Questions and Answers
Question 1: An appraiser reconciles the cost approach at $320,000 and the sales comparison approach at $295,000, then concludes $315,000. What concern should a reviewer note?
- The reconciled value must always be the average of all approaches
- The reconciled value falls outside the range indicated by the approaches without explanation (Correct answer)
- The sales comparison approach should always take priority
- The cost approach is inappropriate for residential properties
Correct answer: The reconciled value falls outside the range indicated by the approaches without explanation
A reconciled value that exceeds the highest approach indication without explanation is a credibility deficiency a reviewer must flag.
Question 2: When reviewing adjustments in the sales comparison approach, a reviewer finds all comparable sales received the same dollar adjustment for location with no explanation. This suggests:
- Appropriate standardization of the adjustment process
- Possible unsupported or arbitrary adjustments requiring further justification (Correct answer)
- Compliance with paired sales analysis requirements
- Proper use of the appraiser's market knowledge
Correct answer: Possible unsupported or arbitrary adjustments requiring further justification
Identical adjustments across all comparables without market support or explanation indicate potentially unsupported, arbitrary figures.
Question 3: A reviewer notes that the effective date of the appraisal under review is 18 months prior to the review date. What additional consideration applies?
- The review is invalid because of the time gap
- The reviewer must consider whether market conditions have changed materially since the effective date (Correct answer)
- The reviewer should update the value to the current date
- No special consideration is required for retrospective appraisals
Correct answer: The reviewer must consider whether market conditions have changed materially since the effective date
When significant time has passed, reviewers must assess whether market changes affect the continued reliability of the original appraisal.
Question 4: In the context of appraisal review, what does 'workfile adequacy' refer to?
- The physical size of the appraiser's file folder
- Whether the appraiser's documentation is sufficient to support the opinions and conclusions in the report (Correct answer)
- The number of comparable sales analyzed
- The digital format used to store appraisal data
Correct answer: Whether the appraiser's documentation is sufficient to support the opinions and conclusions in the report
USPAP requires appraisers to maintain workfiles with sufficient data and analysis to support their report; reviewers assess whether this standard is met.
Question 5: When reviewing an income approach, a reviewer finds the appraiser used a capitalization rate without citing any market data or extraction methodology. This is best characterized as:
- Acceptable if the cap rate is within the typical market range
- An unsupported assumption that undermines the credibility of the income approach (Correct answer)
- A minor reporting deficiency with no impact on value reliability
- Appropriate professional judgment not requiring documentation
Correct answer: An unsupported assumption that undermines the credibility of the income approach
Capitalization rates must be derived from and supported by market evidence; an unexplained cap rate represents an unsupported assumption.
Question 6: A reviewer disagrees with the appraiser's highest and best use conclusion. The reviewer's report should:
- Ignore the disagreement if the value conclusion seems reasonable
- State the reviewer's disagreement, provide the basis for the alternative conclusion, and assess the impact on value (Correct answer)
- Simply label the original report as unacceptable
- Only note the disagreement without providing an alternative analysis
Correct answer: State the reviewer's disagreement, provide the basis for the alternative conclusion, and assess the impact on value
USPAP Standard 3 requires reviewers to provide the basis for disagreement and assess its impact on the work being reviewed.
Question 7: Which condition would most likely cause a reviewer to classify an appraisal as 'unacceptable' rather than 'acceptable with conditions'?
- One comparable sale located slightly outside the defined market area
- A fundamental USPAP violation such as a missing certification or undisclosed extraordinary assumption (Correct answer)
- Minor typographical errors in the property address
- Use of a form report rather than a narrative format
Correct answer: A fundamental USPAP violation such as a missing certification or undisclosed extraordinary assumption
Fundamental USPAP violations—such as a missing certification—render a report non-compliant and generally unacceptable rather than merely conditional.
CAR Appraisal Reviewer Report Analysis 3
An appraiser reconciles the cost approach at $320,000 and the sales comparison approach at $295,000, then concludes $315,000.
What concern should a reviewer note?