FHA Legal & Ethical Standards in Appraisal 3 — Questions and Answers
Question 1: The Scope of Work Rule in USPAP requires appraisers to determine the scope that is necessary to produce:
- The highest possible value conclusion
- Credible assignment results given the intended use (Correct answer)
- Results acceptable to the client's review department
- Results consistent with prior appraisals of the same property
Correct answer: Credible assignment results given the intended use
The scope of work must be sufficient to produce credible results for the stated intended use, not merely satisfy client preference.
Question 2: Which federal law prohibits discriminatory appraisal practices by making it illegal to assign a value to a property based on race or national origin of residents?
- Truth in Lending Act (TILA)
- Equal Credit Opportunity Act (ECOA)
- Fair Housing Act (FHA) (Correct answer)
- Community Reinvestment Act (CRA)
Correct answer: Fair Housing Act (FHA)
The Fair Housing Act explicitly prohibits appraisal discrimination based on race, color, national origin, religion, sex, familial status, or disability.
Question 3: An appraiser is asked to perform a 'desktop appraisal' for an FHA loan. Under current HUD guidance, this is:
- Standard practice for all FHA properties under $250,000
- Permitted only for refinances in certain low-risk scenarios per HUD waivers (Correct answer)
- Never permitted; FHA always requires an interior inspection
- Permitted if the AMC certifies the property condition
Correct answer: Permitted only for refinances in certain low-risk scenarios per HUD waivers
HUD has allowed limited desktop or exterior-only appraisals in specific low-risk refinance programs, but interior inspections remain the default for purchase transactions.
Question 4: A borrower contacts an FHA appraiser directly after the appraisal is complete to dispute the value. The appraiser's best course of action is to:
- Discuss the comparables with the borrower and revise if convinced
- Direct the borrower to the lender's formal reconsideration of value process (Correct answer)
- Refuse any communication since the borrower is not the client
- Provide the borrower with a copy of the workfile
Correct answer: Direct the borrower to the lender's formal reconsideration of value process
Appraiser independence requires value disputes to go through the lender's formal ROV process, not direct borrower pressure on the appraiser.
Question 5: When does USPAP require a signed certification in an appraisal report?
- Only when the appraisal is for a federally related transaction
- In every written appraisal report, without exception (Correct answer)
- Only when the report will be used in a legal proceeding
- Only for reports exceeding $500,000 in value
Correct answer: In every written appraisal report, without exception
USPAP's Certification requirement applies to every written appraisal report regardless of transaction type or value.
Question 6: An appraiser holds a state Certified Residential credential but is asked to appraise a 12-unit apartment building for FHA. The appraiser should:
- Accept if the property is in a rural area
- Accept because FHA permits Certified Residential appraisers for all residential property
- Decline because residential certification limits the appraiser to 1-4 unit residential properties (Correct answer)
- Accept with a co-signer who holds Certified General credentials
Correct answer: Decline because residential certification limits the appraiser to 1-4 unit residential properties
Certified Residential appraisers are limited to 1-4 unit residential properties; income-producing properties of 5+ units require Certified General credentials.
Question 7: Under USPAP's Management section of the Ethics Rule, which practice is explicitly prohibited?
- Charging a flat fee for an appraisal
- Accepting an assignment from an AMC
- Paying a referral fee to obtain an appraisal assignment from a non-appraisal entity (Correct answer)
- Using a trainees assistance in data collection
Correct answer: Paying a referral fee to obtain an appraisal assignment from a non-appraisal entity
USPAP prohibits paying referral or solicitation fees to non-appraisers in exchange for appraisal assignments.
FHA Legal & Ethical Standards in Appraisal 3
The Scope of Work Rule in USPAP requires appraisers to determine the scope that is necessary to produce: