FHA Client Advisory & Consultation 3 — Questions and Answers
Question 1: An FHA client requests an appraisal update letter stating the value has not changed, six months after the original appraisal. What must the appraiser do before issuing the update?
- Issue the update automatically since six months is within the FHA validity period
- Re-inspect the property and research current market data to determine whether the original value still holds (Correct answer)
- Charge a full appraisal fee and produce a new appraisal report
- Contact HUD directly for approval before issuing any update
Correct answer: Re-inspect the property and research current market data to determine whether the original value still holds
Before certifying that value is unchanged, the appraiser must conduct a new market analysis and re-inspect or acknowledge current property condition to support the update.
Question 2: When advising a client on the intended use of an FHA appraisal, the appraiser discovers the client plans to use the report for a purpose not originally disclosed. What is the appraiser's obligation?
- Allow the new use since the appraisal is already complete
- Assess whether the new use renders the appraisal misleading and communicate any concerns to the client (Correct answer)
- Automatically revoke the original report
- Notify HUD of the change in intended use
Correct answer: Assess whether the new use renders the appraisal misleading and communicate any concerns to the client
The appraiser must evaluate whether the undisclosed use would make the appraisal misleading and advise the client accordingly, potentially requiring a new assignment.
Question 3: A client pressures an FHA appraiser to remove a Minimum Property Requirement (MPR) deficiency noted in the report. The appraiser has no new information. What should the appraiser do?
- Remove it to maintain a good client relationship
- Remove it only if the agent provides a signed disclosure
- Decline to remove it because the observation was accurate and removing it would misrepresent the property condition (Correct answer)
- Submit a supplemental report to HUD explaining the pressure
Correct answer: Decline to remove it because the observation was accurate and removing it would misrepresent the property condition
Accurately observed MPR deficiencies cannot be removed from the report without factual basis — doing so would constitute a misrepresentation.
Question 4: An FHA lender asks the appraiser to confirm in the report that the neighborhood is 'stable' to satisfy underwriting requirements, but market data shows declining values. What must the appraiser do?
- Describe the neighborhood as stable to assist the lender
- Report market conditions accurately as declining, regardless of the client's preference (Correct answer)
- Use 'stable' but note the declining trend in an addendum
- Withdraw from the assignment to avoid the conflict
Correct answer: Report market conditions accurately as declining, regardless of the client's preference
FHA appraisers must report market conditions factually; characterizing a declining market as stable misrepresents material facts.
Question 5: During client consultation, a lender asks an appraiser to value a property 'as repaired' when repairs are not yet complete. What must the appraiser do?
- Decline the assignment entirely as FHA prohibits as-repaired appraisals
- Complete an 'as repaired' appraisal using a hypothetical condition, subject to completion requirements, and clearly disclose it (Correct answer)
- Value the property in current condition only, ignoring the repair plans
- Use an extraordinary assumption that repairs are complete without disclosure
Correct answer: Complete an 'as repaired' appraisal using a hypothetical condition, subject to completion requirements, and clearly disclose it
FHA permits 'as-repaired' appraisals using a hypothetical condition when repairs are incomplete, provided the condition is clearly disclosed and the report is subject to completion.
Question 6: An FHA appraiser receives a client's scope of work agreement that conflicts with USPAP Standards. Which takes precedence?
- The client's scope of work agreement, since the client is paying
- USPAP Standards, which set the minimum requirements that cannot be waived by a client (Correct answer)
- HUD guidelines, which supersede both USPAP and the client agreement
- The conflict must be resolved by an arbitrator before the assignment proceeds
Correct answer: USPAP Standards, which set the minimum requirements that cannot be waived by a client
USPAP establishes minimum requirements that appraisers must meet regardless of client instructions; clients cannot contractually require appraisers to violate USPAP.
Question 7: A client asks an FHA appraiser to appraise a property the appraiser previously appraised for a different client two years ago at a significantly different value. What must the appraiser consider?
- Decline automatically because prior involvement creates a per se conflict
- Disclose the prior service and assess whether it impairs objectivity before accepting (Correct answer)
- Complete the assignment using the prior value as a starting point
- Obtain written consent from the prior client before proceeding
Correct answer: Disclose the prior service and assess whether it impairs objectivity before accepting
USPAP requires the appraiser to disclose prior services involving the property and assess whether that prior involvement impairs objectivity.
FHA Client Advisory & Consultation 3
An FHA client requests an appraisal update letter stating the value has not changed, six months after the original appraisal.
What must the appraiser do before issuing the update?