FHA FHA Appraisal Report Writing & Standards 2 — Questions and Answers
Question 1: Under FHA guidelines, what is the appraiser required to do when the contract price for a property exceeds the appraised value?
- Adjust the appraised value upward to match the contract price
- Report the contract price and appraised value separately; the lower value governs LTV (Correct answer)
- Require the buyer and seller to renegotiate the price
- Decline to complete the appraisal
Correct answer: Report the contract price and appraised value separately; the lower value governs LTV
The appraiser reports both values independently; FHA uses the lesser of the appraised value or contract price to calculate the maximum insurable mortgage amount.
Question 2: What is an 'extraordinary assumption' in an FHA appraisal report?
- An assumption that automatically reduces the appraised value
- An assumption that, if false, could alter the appraiser's opinions or conclusions (Correct answer)
- A required HUD assumption about market conditions
- An assumption about the borrower's creditworthiness
Correct answer: An assumption that, if false, could alter the appraiser's opinions or conclusions
An extraordinary assumption is a specific assumption that, if found to be false, could alter the appraiser's opinions or conclusions, and must be clearly stated in the report.
Question 3: When must an FHA appraiser perform a 'desk review' or 'field review' of a prior appraisal?
- When the lender requests a second opinion on value
- When assigned as a review appraiser by the lender or AMC (Correct answer)
- When the borrower disputes the original value
- When the property is in a declining market
Correct answer: When assigned as a review appraiser by the lender or AMC
An FHA review appraisal is performed when the lender or AMC assigns a review appraiser to evaluate the quality and accuracy of an original appraisal report.
Question 4: What does 'as-is' value mean in the context of an FHA appraisal?
- The value assuming all repairs have been completed
- The value of the property in its current physical condition on the effective date of the appraisal (Correct answer)
- The value after proposed improvements are made
- The value excluding any personal property
Correct answer: The value of the property in its current physical condition on the effective date of the appraisal
'As-is' value reflects the property's current condition on the effective date of the appraisal, without accounting for any required repairs or proposed improvements.
Question 5: For FHA appraisals, what is the appraiser required to report in the 'neighborhood' section of the URAR?
- Only properties that have sold in the last 30 days
- Land use, housing trends, price ranges, and marketing time for the neighborhood (Correct answer)
- The racial or ethnic composition of the neighborhood
- Only factors that positively affect property value
Correct answer: Land use, housing trends, price ranges, and marketing time for the neighborhood
The neighborhood section of the URAR requires the appraiser to describe land use, housing trends, price ranges, and typical marketing time, providing context for the subject's value.
Question 6: Under USPAP Standard Rule 1, which of the following best describes the appraiser's obligation regarding the scope of work in an FHA appraisal?
- The scope of work is set entirely by the lender
- The appraiser must identify and perform the scope of work necessary to develop credible assignment results (Correct answer)
- The minimum scope is defined by state law only
- The scope is always a full interior and exterior inspection regardless of property type
Correct answer: The appraiser must identify and perform the scope of work necessary to develop credible assignment results
USPAP SR 1-2(f) requires the appraiser to identify and perform the scope of work necessary to produce credible assignment results for the specific appraisal problem.
FHA FHA Appraisal Report Writing & Standards 2
Under FHA guidelines, what is the appraiser required to do when the contract price for a property exceeds the appraised value?