CAR Professional Standards & Ethics 2 — Questions and Answers
Question 1: Under USPAP, which situation would constitute a conflict of interest that a reviewer MUST disclose?
- Reviewing an appraisal of a property the reviewer owns (Correct answer)
- Using a different valuation approach than the original appraiser
- Disagreeing with the original appraiser's conclusion
- Reviewing an appraisal outside the reviewer's primary market area
Correct answer: Reviewing an appraisal of a property the reviewer owns
USPAP's Ethics Rule requires reviewers to disclose any current or prospective interest in the property that is the subject of the appraisal being reviewed.
Question 2: A review appraiser who completes an appraisal review without inspecting the subject property must:
- Obtain written permission from the client
- Disclose this limitation in the review report (Correct answer)
- Defer to the original appraiser's inspection findings
- Conduct a desk review only
Correct answer: Disclose this limitation in the review report
USPAP Standard 3 requires the reviewer to clearly disclose any limitations on the scope of work, including whether a property inspection was or was not performed.
Question 3: Which of the following best describes the 'impartiality' requirement for appraisal reviewers under USPAP's Ethics Rule?
- The reviewer must always agree with the original appraiser's value conclusion
- The reviewer must perform work free from bias and without accommodation of personal interests (Correct answer)
- The reviewer must be geographically distant from the subject property
- The reviewer must use identical comparable sales as the original appraiser
Correct answer: The reviewer must perform work free from bias and without accommodation of personal interests
Impartiality under USPAP's Ethics Rule means the reviewer must be unbiased and not allow personal interests or outside pressure to influence the review conclusion.
Question 4: When a client pressures a review appraiser to 'find something wrong' with an appraisal to justify declining a loan, the reviewer should:
- Comply if the client is a repeat customer
- Decline the assignment if objectivity cannot be maintained (Correct answer)
- Complete the review but note the pressure in a separate memo
- Contact the original appraiser to renegotiate the value
Correct answer: Decline the assignment if objectivity cannot be maintained
USPAP's Ethics Rule prohibits reviewers from performing assignments with a predetermined outcome; if client pressure compromises objectivity, the assignment must be declined.
Question 5: According to USPAP, which record-keeping requirement applies to appraisal review work files?
- Work files must be retained for at least 3 years after preparation or 1 year after final disposition, whichever is longer
- Work files must be retained for at least 5 years after preparation or 2 years after final disposition, whichever is longer (Correct answer)
- Work files may be destroyed after the client acknowledges receipt of the report
- Work files need only be retained if the reviewer developed a value conclusion
Correct answer: Work files must be retained for at least 5 years after preparation or 2 years after final disposition, whichever is longer
USPAP's Record Keeping Rule requires appraisal review work files to be retained for at least five years after preparation or at least two years after final disposition of any judicial proceeding, whichever is longer.
Question 6: A reviewer discovers mid-assignment that the original appraiser is a close personal friend. Under USPAP, the reviewer should:
- Complete the review since friendship doesn't affect technical competence
- Disclose the relationship to the client and withdraw if objectivity is impaired (Correct answer)
- Ask the friend to revise the appraisal before submitting the review
- Complete the review only if the value conclusion is supportable
Correct answer: Disclose the relationship to the client and withdraw if objectivity is impaired
USPAP requires disclosure of any personal interest or relationship that could impair impartiality, and withdrawal if the reviewer cannot remain objective.
Question 7: Which conduct is explicitly prohibited by USPAP's Ethics Rule for appraisal reviewers?
- Accepting an assignment with a contingent fee based on the review outcome (Correct answer)
- Reviewing an appraisal in a market where the reviewer is less experienced
- Requesting additional data from the original appraiser
- Using a different scope of work than the original appraiser
Correct answer: Accepting an assignment with a contingent fee based on the review outcome
USPAP's Ethics Rule explicitly prohibits contingent fees where payment depends on the outcome of the review, as this creates an inherent conflict of interest.
CAR Professional Standards & Ethics 2
Under USPAP, which situation would constitute a conflict of interest that a reviewer MUST disclose?