CMC Property Appraisal and Valuation 3

Question 1

How is the Loan-to-Value (LTV) ratio calculated, and what is its significance to mortgage lenders?

Accepted Answer

LTV = loan amount / appraised value (or purchase price, whichever is lower); a higher LTV indicates greater lender risk

Answer

LTV = monthly payment / appraised value; a higher LTV signals lower borrower risk

Answer

LTV = appraised value / purchase price; used only to determine the applicable interest rate tier

Answer

LTV = down payment / loan amount; used exclusively to determine whether PMI is required

Question 2

When an appraisal comes in lower than the agreed-upon purchase price, what is the typical mortgage lending implication?

Accepted Answer

The lender will base the loan on the lower appraised value, requiring the buyer to cover the gap or renegotiate the price

Answer

The lender will automatically adjust the loan amount upward to cover the full purchase price

Answer

The transaction must be cancelled and the property re-listed at the appraised value

Answer

A second appraisal must be ordered and averaged with the first to determine the loan amount

Question 3

What is the primary function of an Appraisal Management Company (AMC) in the mortgage lending process?

Accepted Answer

To act as an independent intermediary managing the appraisal process between lenders and appraisers, ensuring independence

Answer

To certify and license real estate appraisers on behalf of state regulatory agencies

Answer

To purchase completed appraisals from lenders and sell them on the secondary market

Answer

To conduct all property valuations using automated valuation models on behalf of the lender

Question 4

Under appraiser independence requirements established by the Dodd-Frank Act, which of the following actions is PROHIBITED?

Accepted Answer

A lender or its agents pressuring, coercing, or incentivizing an appraiser to reach a predetermined value

Answer

A lender ordering appraisals through a state-certified independent appraiser

Answer

A loan officer informing the appraiser of the purchase contract price

Answer

An appraiser using the sales comparison approach as the primary method for a residential property

Question 5

What is a 'drive-by' or exterior-only appraisal (Form 2055), and when is it typically used?

Accepted Answer

A limited appraisal in which the appraiser inspects and photographs only the exterior without entering the property

Answer

A full appraisal conducted using only aerial and satellite photographs without any physical inspection

Answer

A preliminary value estimate that does not meet USPAP standards and cannot be used for lending

Answer

An appraisal conducted by driving the neighborhood to assess market conditions without visiting the subject

Question 6

What is the difference between 'as-is' value and 'as-improved' (subject-to) value in a property appraisal?

Accepted Answer

'As-is' reflects the property's current condition and value; 'as-improved' reflects its value after specified repairs or improvements are completed

Answer

'As-is' reflects projected future value after market appreciation; 'as-improved' reflects the current stabilized value

Answer

'As-is' applies only to commercial properties; 'as-improved' applies to residential properties under FHA guidelines

Answer

Both terms describe the same value but are used by different loan programs — FHA uses 'as-is' and VA uses 'as-improved'

Question 7

For single-family residential mortgage appraisals, which valuation approach is typically given the greatest weight and why?

Accepted Answer

The sales comparison approach, because it directly reflects recent actual buyer behavior and market pricing

Answer

The cost approach, because it establishes the absolute minimum value the property should command

Answer

The income approach, because it reflects the investment return potential of any residential property

Answer

All three approaches are always weighted equally as required by USPAP for residential properties