FHA Legal & Ethical Standards in Appraisal 2 — Questions and Answers
Question 1: Under USPAP's Confidentiality section, an appraiser may disclose assignment results without client consent to:
- A prospective buyer of the property
- A state appraisal regulatory agency conducting an investigation (Correct answer)
- A competing appraiser seeking market data
- A lender not party to the original assignment
Correct answer: A state appraisal regulatory agency conducting an investigation
USPAP permits disclosure to state enforcement bodies and peer reviewers authorized by law without client consent.
Question 2: An FHA appraiser discovers mid-assignment that the property was recently used as a methamphetamine lab. The most appropriate action is to:
- Complete the appraisal and note it in the addendum
- Withdraw from the assignment and notify the client immediately
- Disclose the finding in the report and adjust value accordingly (Correct answer)
- Continue only if remediation has occurred and is documented
Correct answer: Disclose the finding in the report and adjust value accordingly
The appraiser must disclose known adverse environmental conditions in the report; if remediation is unverified, value impact must be addressed.
Question 3: The Dodd-Frank Act's appraiser independence requirements prohibit a lender from:
- Ordering appraisals through an AMC
- Providing the appraiser with a copy of the purchase contract
- Conditioning payment on the appraiser hitting a specific value (Correct answer)
- Requesting a reconsideration of value with new comparable data
Correct answer: Conditioning payment on the appraiser hitting a specific value
Conditioning appraisal fees or future work on a predetermined value outcome violates appraiser independence regulations.
Question 4: A trainee appraiser signs an FHA appraisal report. Which statement is correct?
- This is permissible if the trainee has passed the state exam
- This is prohibited because FHA requires a Certified Residential or Certified General appraiser to sign (Correct answer)
- The trainee may sign if supervised by a licensed appraiser
- Trainees may sign only for properties under $100,000
Correct answer: This is prohibited because FHA requires a Certified Residential or Certified General appraiser to sign
FHA requires the appraiser to hold at minimum a Certified Residential credential; trainees are not eligible to sign FHA reports.
Question 5: The ETHICS RULE in USPAP requires appraisers to avoid performing an assignment with which of the following?
- A contingency fee based on hours worked
- A fee contingent on the appraised value reported (Correct answer)
- A flat fee agreed upon before completing the assignment
- A fee paid by the borrower rather than the lender
Correct answer: A fee contingent on the appraised value reported
USPAP's Ethics Rule prohibits contingent fees tied to the value conclusion because they create a prohibited bias.
Question 6: An appraiser receives a request to update an appraisal performed two years ago. Under USPAP, the appraiser must:
- Simply change the effective date and re-sign the original report
- Treat it as a new assignment and comply with all current USPAP requirements (Correct answer)
- Update only the market condition adjustments from the prior report
- Decline the update because USPAP prohibits reuse of prior work
Correct answer: Treat it as a new assignment and comply with all current USPAP requirements
An update is a new assignment requiring full USPAP compliance, not merely a revision of the prior report.
Question 7: Under HUD Handbook 4000.1, an FHA appraiser who observes defective paint on pre-1978 housing must:
- Note the condition and make no adjustment since it is common in older homes
- Condition the appraisal on repair or professional lead-based paint test (Correct answer)
- Automatically reject the property from FHA eligibility
- Refer the buyer to a separate lead inspector without noting it in the report
Correct answer: Condition the appraisal on repair or professional lead-based paint test
FHA requires the appraiser to condition the report on repair of deteriorated paint in pre-1978 homes to address lead-based paint hazards.
FHA Legal & Ethical Standards in Appraisal 2
Under USPAP's Confidentiality section, an appraiser may disclose assignment results without client consent to: