CAR Appraisal Reviewer Risk Assessment 2

Question 1

When reviewing an appraisal for loan collateral risk, which factor most directly signals elevated collateral risk?

Accepted Answer

The loan-to-value ratio based on appraised value is 97%

Answer

A very high LTV ratio means the lender has minimal equity cushion, making collateral risk significant if the borrower defaults.

Question 2

An appraisal reviewer identifies that an appraiser used only distressed sales as comparables for a non-distressed property. This most likely indicates:

Accepted Answer

An unsupported value conclusion that understates market value

Answer

Using only distressed sales for a non-distressed subject likely produces an artificially low value and is not a credible appraisal approach.

Question 3

Which of the following best describes 'scope creep' risk in an appraisal review assignment?

Accepted Answer

The reviewer expanding the review beyond the originally defined scope without client authorization

Answer

Scope creep occurs when the reviewer performs work beyond the agreed engagement terms, creating liability and ethical concerns.

Question 4

Under USPAP's Standards Rule 3-2, a reviewer must identify the work under review. What is the primary risk if this step is inadequately performed?

Accepted Answer

The reviewer may inadvertently render an opinion on a different appraisal than intended

Answer

Failing to properly identify the appraisal being reviewed can cause the reviewer to critique or rely on the wrong report, undermining the review's validity.

Question 5

A desk review reveals that the appraiser made no market conditions adjustment despite a rapidly appreciating market. The primary risk this poses to the lender is:

Accepted Answer

An overstated value relative to current market conditions

Answer

Omitting a positive market conditions adjustment in a rising market can inflate the time-adjusted value, overstating collateral and increasing lender risk.

(CAR) Certified Appraisal Reviewer Practice Test

(CAR) Certified Appraisal Reviewer Practice Test

CAR Appraisal Reviewer Risk Assessment 2