CRPA Tax, Legal, & Financial Considerations 4 — Questions and Answers
Question 1: Which ERC-recommended appraisal practice helps ensure consistency when two appraisers produce divergent value opinions on a relocation property?
- Ordering a third appraisal to average with the others
- Using the higher of the two appraised values
- Conducting a field review appraisal to reconcile differences (Correct answer)
- Defaulting to the broker price opinion
Correct answer: Conducting a field review appraisal to reconcile differences
A field review appraisal examines the subject property and both original appraisals to identify errors and reconcile significant value discrepancies.
Question 2: For federal income tax purposes, points paid by an employer on behalf of a relocating employee to obtain a mortgage on the new home are generally:
- Deductible by the employee as mortgage interest in the year paid
- Taxable income to the employee in the year received (Correct answer)
- Excluded from income as a qualified fringe benefit
- Deferred until the employee sells the new home
Correct answer: Taxable income to the employee in the year received
Points paid by an employer on the employee's behalf constitute additional compensation and are included in the employee's taxable income.
Question 3: A 'homesale loss protection' policy in a corporate relocation program is designed to reimburse employees for:
- Real estate commission fees above a set percentage
- The difference between original purchase price and net sale proceeds (Correct answer)
- Temporary housing costs during the transition period
- Closing costs on the purchase of the new home
Correct answer: The difference between original purchase price and net sale proceeds
Homesale loss protection covers the gap when an employee must sell at a price below what they originally paid, protecting against market depreciation.
Question 4: Under RESPA, which disclosure must be provided to a borrower within three business days of loan application?
- Final Closing Disclosure
- Loan Estimate (Correct answer)
- Good Faith Estimate (obsolete form)
- HUD-1 Settlement Statement
Correct answer: Loan Estimate
RESPA as amended by TRID requires lenders to provide the Loan Estimate within three business days of receiving a completed loan application.
Question 5: A relocation appraiser who also acts as a buyer's agent in purchasing the subject property would violate which principle?
- The sales comparison approach methodology
- Independence and impartiality required by USPAP Ethics Rule (Correct answer)
- ERC marketing period guidelines
- State licensing continuing education requirements
Correct answer: Independence and impartiality required by USPAP Ethics Rule
USPAP's Ethics Rule prohibits an appraiser from having a financial interest in the outcome of an appraisal, and acting as a buyer's agent creates an obvious conflict.
Question 6: Which of the following best describes 'equity advance' in a corporate relocation program?
- A loan provided to the employee against expected home sale proceeds (Correct answer)
- Reimbursement of real estate commissions at closing
- Employer payment of the employee's mortgage during marketing
- A grant to cover down payment on the new home
Correct answer: A loan provided to the employee against expected home sale proceeds
An equity advance is an interest-free or low-interest loan given to the employee before the home sells, allowing them to use anticipated equity to purchase at the new location.
Question 7: State transfer taxes on a home sale in a corporate relocation program are typically negotiated to be paid by:
- The relocating employee personally
- The relocation management company or employer under the corporate policy (Correct answer)
- Split equally between buyer and seller per local custom
- The title insurance company as part of its premium
Correct answer: The relocation management company or employer under the corporate policy
Corporate relocation policies typically include transfer taxes as a covered closing cost paid by the employer or relocation management company to protect the employee.
CRPA Tax, Legal, & Financial Considerations 4
Which ERC-recommended appraisal practice helps ensure consistency when two appraisers produce divergent value opinions on a relocation property?