CAR Risk Management & Mitigation 3

Question 1

In the context of appraisal review, 'market conditions risk' is best described as the risk that:

Accepted Answer

Value conclusions may be outdated due to market changes between the effective date and loan closing

Answer

Market conditions risk arises when time elapses between an appraisal's effective date and the transaction, potentially making the value conclusion stale.

Question 2

A reviewer examining a complex income-producing property appraisal should be most alert to capitalization rate support because:

Accepted Answer

Small changes in cap rate produce large swings in value via the income approach

Answer

Because value = NOI ÷ cap rate, even a 0.5% change in cap rate can shift the value conclusion by hundreds of thousands of dollars on large properties.

Question 3

When reviewing an appraisal of a property in a declining market, which comparable sale characteristic is MOST important to verify?

Accepted Answer

Whether each comparable sale is within six months of the effective date

Answer

In a declining market, older sales may overstate value; recent sales are critical to capture the downward trend.

Question 4

A residential appraisal shows no adjustment for time on comparables that are 8–14 months old during a period of 10% annual appreciation. The reviewer should flag this as:

Accepted Answer

A potentially overstated value due to missing market conditions adjustments

Answer

Failing to make upward market conditions adjustments on older sales in an appreciating market results in understating value, not overstating.

Question 5

An appraiser's certification states the property was inspected, but the field review reveals the appraiser never entered the structure. This creates primary risk related to:

Accepted Answer

Misleading certification and potentially unreliable condition rating

Answer

A false certification that an inspection occurred undermines the reliability of condition-dependent value conclusions and may constitute misrepresentation.

(CAR) Certified Appraisal Reviewer Practice Test

(CAR) Certified Appraisal Reviewer Practice Test

CAR Risk Management & Mitigation 3