CRPA Relocation Appraisal Methodology & Terminology 4 — Questions and Answers
Question 1: What is the purpose of the 'marketing strategy' section in an ERC-compliant relocation appraisal?
- To recommend listing agents and commission structures
- To provide the relocation company with pricing and exposure guidance to achieve the anticipated selling price (Correct answer)
- To document the transferee's mortgage pre-approval
- To outline the employer's relocation benefit package
Correct answer: To provide the relocation company with pricing and exposure guidance to achieve the anticipated selling price
The marketing strategy section guides the relocation company and transferee on recommended list price, timing, and conditions to achieve the forecasted selling price.
Question 2: In the context of relocation appraisals, 'external obsolescence' (also called economic obsolescence) is caused by:
- Outdated kitchen cabinets or fixtures inside the home
- Factors outside the property boundaries, such as proximity to a newly built highway (Correct answer)
- Deferred maintenance on the property's exterior
- An over-sized garage relative to neighborhood norms
Correct answer: Factors outside the property boundaries, such as proximity to a newly built highway
External obsolescence stems from negative influences outside the property, such as traffic, noise, proximity to industrial uses, or broader economic decline.
Question 3: A relocation appraiser must complete a 'restricted use appraisal report' for an equity buyout. Which of the following is TRUE about this report type?
- It contains the same detail as a self-contained report but costs less
- It may only be used by the client named in the report and cannot be understood without the workfile (Correct answer)
- It is the most detailed report format available under USPAP
- It does not require the appraiser to sign a certification
Correct answer: It may only be used by the client named in the report and cannot be understood without the workfile
A restricted use (now 'restricted appraisal report' under USPAP 2020-21) is limited to the named client and lacks the detail for any other user to understand the analysis without the workfile.
Question 4: When a relocation appraiser inspects a property and finds it has an unpermitted addition, the most appropriate response is to:
- Include the addition in GLA without comment
- Exclude the addition from the appraisal entirely
- Note the unpermitted status, assess market reaction, and reflect any negative impact in value (Correct answer)
- Immediately terminate the appraisal assignment
Correct answer: Note the unpermitted status, assess market reaction, and reflect any negative impact in value
Unpermitted additions must be disclosed and any market value impact — typically negative due to lender and buyer concerns — must be reflected in the appraisal.
Question 5: Which of the following best describes the 'highest and best use' analysis required in a relocation appraisal?
- The use that generates the maximum gross rent regardless of legality
- The reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive (Correct answer)
- The use designated by the current owner's intent for the property
- Any use approved by the local zoning board in the past five years
Correct answer: The reasonably probable use that is legally permissible, physically possible, financially feasible, and maximally productive
Highest and best use must satisfy all four criteria: legal permissibility, physical possibility, financial feasibility, and maximum productivity.
Question 6: Under ERC guidelines, how should a relocation appraiser handle a sale that was a short sale or bank-owned (REO) transaction when used as a comparable?
- Use it without adjustment since all closed sales are valid comparables
- Disclose the distressed nature and consider whether or not it represents an arm's-length market transaction (Correct answer)
- Weight it more heavily because distressed sales reflect true market value
- Ignore it entirely as ERC prohibits distressed sales as comparables
Correct answer: Disclose the distressed nature and consider whether or not it represents an arm's-length market transaction
Distressed sales may not represent arm's-length transactions; the appraiser must disclose their nature and evaluate their applicability to the analysis.
Question 7: Which of the following best defines 'contributory value' as used in relocation appraisals?
- The total market value of a property including all improvements
- The amount a specific feature or component adds to (or subtracts from) the total property value (Correct answer)
- The replacement cost of a component new, minus depreciation
- The assessed value assigned by the county for tax purposes
Correct answer: The amount a specific feature or component adds to (or subtracts from) the total property value
Contributory value measures the incremental impact of a feature on total property value, which may differ significantly from its cost.
CRPA Relocation Appraisal Methodology & Terminology 4
What is the purpose of the 'marketing strategy' section in an ERC-compliant relocation appraisal?