IACP Legal & Ethical Standards in Appraisal 2 — Questions and Answers
Question 1: Under USPAP's Ethics Rule, which action constitutes a conflict of interest that must be disclosed?
- Appraising a property in a zip code where you previously appraised another property
- Having a financial interest in a property adjacent to the subject being appraised (Correct answer)
- Using a trainee to assist in data collection under your supervision
- Accepting an assignment from a client you have worked with before
Correct answer: Having a financial interest in a property adjacent to the subject being appraised
A financial interest in nearby or related properties creates a conflict of interest that must be disclosed under USPAP's Ethics Rule.
Question 2: When an appraiser accepts an assignment with a predetermined value conclusion, this violates which USPAP rule?
- Scope of Work Rule
- Competency Rule
- Ethics Rule — Independence (Correct answer)
- Record Keeping Rule
Correct answer: Ethics Rule — Independence
Accepting assignments contingent on a specific outcome violates the Independence section of USPAP's Ethics Rule.
Question 3: An appraiser is asked to update an appraisal report originally completed two years ago. What is the primary ethical concern?
- The appraisal fee may need to be renegotiated
- Market conditions may have changed, requiring a new analysis rather than a simple update (Correct answer)
- The client must sign a new engagement letter before work can begin
- The appraiser must obtain a new E&O insurance certificate
Correct answer: Market conditions may have changed, requiring a new analysis rather than a simple update
Significant market changes over two years may make a simple update misleading; the appraiser must ensure the report reflects current conditions.
Question 4: Which of the following best describes 'intended use' as required by USPAP?
- The geographic area where the property is located
- The purpose for which the client will use the appraisal report (Correct answer)
- The type of value being estimated in the assignment
- The methodology selected by the appraiser
Correct answer: The purpose for which the client will use the appraisal report
Intended use refers to how the client or intended users will employ the appraisal, and it shapes the scope of work and report content.
Question 5: An appraiser discovers after completing a report that a comparable sale was fraudulent. The ethical obligation is to:
- Do nothing because the report is already submitted
- Notify the client and correct the report if the fraudulent sale materially affected the conclusion (Correct answer)
- Report the fraud directly to law enforcement before contacting the client
- Issue a new appraisal with a different effective date
Correct answer: Notify the client and correct the report if the fraudulent sale materially affected the conclusion
USPAP's Ethics Rule requires appraisers to correct reports containing significant errors, including those based on fraudulent data.
Question 6: State appraiser licensing boards have authority to do all of the following EXCEPT:
- Revoke an appraiser's certification
- Impose civil money penalties for USPAP violations
- Amend USPAP standards without ASB approval (Correct answer)
- Suspend an appraiser's license pending investigation
Correct answer: Amend USPAP standards without ASB approval
Only the Appraisal Standards Board (ASB) has authority to amend USPAP; state boards enforce compliance but cannot change the standards.
Question 7: A federally related transaction appraisal must be performed by a:
- Licensed or certified appraiser, depending on transaction complexity and amount (Correct answer)
- Certified General Appraiser only, regardless of property type
- Any individual with demonstrated competency, even if unlicensed
- Broker with MAI designation
Correct answer: Licensed or certified appraiser, depending on transaction complexity and amount
FIRREA requires that federally related transactions use licensed or certified appraisers based on thresholds and property type requirements.
IACP Legal & Ethical Standards in Appraisal 2
Under USPAP's Ethics Rule, which action constitutes a conflict of interest that must be disclosed?