FHA Client Advisory & Consultation 2 — Questions and Answers
Question 1: An FHA lender asks an appraiser to reconsider value after the appraisal came in below the contract price. What is the appropriate appraiser response?
- Increase the value to match the contract price to facilitate the transaction
- Review any additional comparable sales or data provided and revise only if supported by evidence (Correct answer)
- Refuse any communication with the lender after the report is submitted
- Reduce the value further to demonstrate independence
Correct answer: Review any additional comparable sales or data provided and revise only if supported by evidence
An appraiser may reconsider value only when presented with new, credible data that supports a revision — not simply due to client pressure.
Question 2: When consulting with a client about scope of work for an FHA appraisal, the appraiser determines the assignment requires extraordinary assumptions. What must the appraiser do?
- Keep the extraordinary assumptions confidential to avoid alarming the client
- Disclose the extraordinary assumptions and their potential impact on assignment results to the client (Correct answer)
- Obtain written permission from HUD before using any extraordinary assumptions
- Refuse the assignment if extraordinary assumptions are needed
Correct answer: Disclose the extraordinary assumptions and their potential impact on assignment results to the client
USPAP requires appraisers to disclose extraordinary assumptions and their potential impact on assignment results in the appraisal report and when communicating with clients.
Question 3: A client asks an FHA appraiser to omit a known environmental hazard from the appraisal report to speed up the loan process. How should the appraiser respond?
- Omit the hazard if it is minor and unlikely to affect value significantly
- Comply if the lender provides written indemnification
- Decline to omit the hazard and report it as required by FHA guidelines (Correct answer)
- Defer to the property inspector's report to avoid responsibility
Correct answer: Decline to omit the hazard and report it as required by FHA guidelines
FHA appraisers must report all observed adverse conditions including environmental hazards; omitting them at a client's request violates both USPAP and FHA requirements.
Question 4: A buyer's agent contacts the FHA appraiser directly requesting a copy of the completed appraisal report. What should the appraiser do?
- Provide the report since the buyer has a legal right to it
- Provide the report only if the listing agent also agrees
- Decline and explain that the report is the property of the lender/client (Correct answer)
- Provide a summary of the report but not the full document
Correct answer: Decline and explain that the report is the property of the lender/client
The appraisal report belongs to the client (lender) and may only be released to third parties with the client's authorization.
Question 5: During an FHA appraisal consultation, a lender asks the appraiser to use a specific comparable sale that the appraiser believes is not arm's-length. What is the correct course of action?
- Use the comparable as directed since the client is paying for the assignment
- Analyze the sale, note its non-arm's-length nature, and adjust or exclude it with explanation (Correct answer)
- Immediately withdraw from the assignment
- Report the lender to HUD without further discussion
Correct answer: Analyze the sale, note its non-arm's-length nature, and adjust or exclude it with explanation
The appraiser must analyze the suggested comparable objectively, disclose any non-arm's-length characteristics, and explain why it was adjusted or excluded.
Question 6: An FHA appraiser is asked by a client to provide a verbal update on the likely value range before the written report is complete. What applies under USPAP?
- Verbal communication of assignment results is never permitted under USPAP
- The appraiser may provide a verbal report but must later prepare a written report when required by the assignment (Correct answer)
- Verbal updates are permitted only after the written appraisal is signed
- The appraiser must charge an additional fee for any verbal communication
Correct answer: The appraiser may provide a verbal report but must later prepare a written report when required by the assignment
USPAP permits oral appraisal reports but requires the appraiser to maintain a work file; FHA typically requires a written report, so verbal updates should be preliminary only.
Question 7: A lender instructs the FHA appraiser to assume the property is in average condition regardless of actual observations. The appraiser disagrees with this instruction. What should occur?
- Follow the lender's instruction since they set the scope of work
- Use the hypothetical condition only if it is clearly labeled and disclosed in the report (Correct answer)
- Complete the appraisal ignoring the instruction and note the actual condition
- Immediately terminate the engagement without explanation
Correct answer: Use the hypothetical condition only if it is clearly labeled and disclosed in the report
An assumption contrary to fact constitutes a hypothetical condition, which must be explicitly labeled, disclosed, and explained in the appraisal report.
FHA Client Advisory & Consultation 2
An FHA lender asks an appraiser to reconsider value after the appraisal came in below the contract price.
What is the appropriate appraiser response?