FHA Documentation & Legal Requirements 2 — Questions and Answers
Question 1: When an FHA appraisal report references a prior sale of the subject property, which time frame requires the appraiser to analyze and reconcile any significant price change?
- Within the past 6 months
- Within the past 12 months (Correct answer)
- Within the past 24 months
- Within the past 36 months
Correct answer: Within the past 12 months
FHA requires the appraiser to analyze and reconcile any significant price change for sales of the subject property within the past 12 months.
Question 2: What must an FHA appraiser do if the MLS data used as a data source contains an error that affects the appraisal conclusion?
- Disregard the MLS data entirely and use only public records
- Note the discrepancy, verify with an alternate source, and document the resolution in the report (Correct answer)
- Contact the lender to obtain corrected data before proceeding
- Submit a correction request to the MLS and delay the report
Correct answer: Note the discrepancy, verify with an alternate source, and document the resolution in the report
The appraiser must note data discrepancies, verify through an alternate source, and document how the conflict was resolved within the appraisal report.
Question 3: Under FHA guidelines, which document formally transfers the FHA case number assignment and appraisal to a new lender when a borrower switches lenders?
- FHA Connection Transfer Authorization
- Appraisal Portability Agreement
- Case Transfer Request via FHA Connection (Correct answer)
- HUD-1 Settlement Statement amendment
Correct answer: Case Transfer Request via FHA Connection
A case transfer is processed through FHA Connection, allowing the appraisal and case number to follow the borrower to the new lender.
Question 4: Which section of the Uniform Residential Appraisal Report (URAR/Fannie Mae Form 1004) is primarily used by FHA appraisers to document required repairs and property condition?
- Market Conditions Addendum
- Cost Approach section
- Comments on the Condition of the Property section within Improvements (Correct answer)
- Sales Comparison Approach grid adjustments
Correct answer: Comments on the Condition of the Property section within Improvements
Required repairs and condition issues are documented in the Comments on the Condition of the Property section of the Improvements portion of the URAR.
Question 5: For FHA appraisals, what is the required protocol when the appraiser cannot gain interior access to a comparable sale used in the report?
- Exclude the comparable and use only verified interior-access sales
- Use the comparable with a disclosure that only exterior inspection was possible and verify data from reliable sources (Correct answer)
- Assign a blanket downward adjustment of 5% for all exterior-only comparables
- Contact HUD for permission to use an exterior-only comparable
Correct answer: Use the comparable with a disclosure that only exterior inspection was possible and verify data from reliable sources
FHA allows exterior-only inspection of comparables provided the appraiser discloses the limitation and verifies data through reliable sources such as MLS or public records.
Question 6: When an FHA appraisal is completed on a proposed construction property, which document must be reviewed and referenced to identify the subject property's planned improvements?
- The builder's marketing brochure
- Approved construction plans and specifications (Correct answer)
- The subdivision plat map only
- A letter of intent from the borrower
Correct answer: Approved construction plans and specifications
For proposed construction, the appraiser must review and reference the approved construction plans and specifications to identify all planned improvements.
Question 7: According to FHA Handbook 4000.1, how must the appraiser handle a situation where the contract sales price includes personal property that may inflate the value?
- Ignore personal property unless it exceeds $5,000 in value
- Deduct the contributory value of personal property from the contract price and report the adjusted price (Correct answer)
- Report the full contract price without adjustment and note it in comments
- Refuse to complete the appraisal until personal property is removed from the contract
Correct answer: Deduct the contributory value of personal property from the contract price and report the adjusted price
The appraiser must deduct the contributory value of personal property from the contract price and report the adjusted figure as the basis for the appraisal.
FHA Documentation & Legal Requirements 2
When an FHA appraisal report references a prior sale of the subject property, which time frame requires the appraiser to analyze and reconcile any significant price change?