CGA CGA Appraisal Standards & Ethics 2 — Questions and Answers
Question 1: Under USPAP's Ethics Rule, which of the following constitutes an act of misconduct?
- Accepting an assignment where compensation is contingent on a specific value outcome (Correct answer)
- Disclosing the existence of a prior service to a current client
- Charging a flat fee regardless of the property's value
- Using an extraordinary assumption in an appraisal report
Correct answer: Accepting an assignment where compensation is contingent on a specific value outcome
Accepting contingency-based fee arrangements tied to a predetermined value is expressly prohibited under the USPAP Ethics Rule as it compromises impartiality.
Question 2: What does the term 'scope of work' mean in the context of a USPAP-compliant appraisal?
- The type and extent of research and analyses performed in an appraisal assignment (Correct answer)
- The geographic boundary within which the appraiser must search for comparables
- The total number of approaches to value used in the report
- The regulatory requirements imposed by state licensing boards
Correct answer: The type and extent of research and analyses performed in an appraisal assignment
Scope of work refers to the type and extent of research and analyses performed to develop credible assignment results under USPAP.
Question 3: Which of the following best defines 'bias' as it relates to appraisal ethics?
- A preference or inclination that inhibits impartial judgment (Correct answer)
- An error in the comparable sales selection process
- An overreliance on the income approach versus other approaches
- A disagreement between the appraiser and the client regarding value
Correct answer: A preference or inclination that inhibits impartial judgment
Bias is a preference or inclination that prevents objective analysis, which USPAP prohibits through its independence requirements.
Question 4: An appraiser who is completing an assignment involving a property type with which they have no prior experience must:
- Disclose the lack of knowledge and take steps to acquire necessary competency before completing the assignment (Correct answer)
- Decline the assignment immediately without exception
- Complete the assignment and note the limitation in the limiting conditions
- Rely solely on the client's information to compensate for lack of experience
Correct answer: Disclose the lack of knowledge and take steps to acquire necessary competency before completing the assignment
The Competency Rule requires the appraiser to disclose the deficiency and either gain competency before the assignment or associate with a competent appraiser.
Question 5: What is the definition of 'intended use' in USPAP?
- The use or uses of an appraiser's reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client (Correct answer)
- The method of valuation the appraiser intends to employ
- The purpose for which the subject property is currently utilized
- The market segment to which the appraisal report will be marketed
Correct answer: The use or uses of an appraiser's reported appraisal or appraisal review assignment results, as identified by the appraiser based on communication with the client
Intended use is how the client or other intended users will use the appraisal results, and it must be clearly identified at the beginning of an assignment.
Question 6: Under USPAP, a 'hypothetical condition' is best described as:
- A condition that is contrary to what exists but is assumed for the purpose of analysis (Correct answer)
- An estimate of future market conditions used in a prospective appraisal
- An assumption that a property has no environmental contamination
- A presumption that all zoning requirements have been met
Correct answer: A condition that is contrary to what exists but is assumed for the purpose of analysis
A hypothetical condition assumes something that is known to be false as of the effective date, used to analyze an as-if scenario.
CGA CGA Appraisal Standards & Ethics 2
Under USPAP's Ethics Rule, which of the following constitutes an act of misconduct?