IACP Legal & Ethical Standards in Appraisal 3 — Questions and Answers
Question 1: Under the IACP code of conduct, an appraiser who accepts an assignment must ensure they possess:
- Membership in a national appraisal organization
- Competency to complete the assignment or a plan to acquire it (Correct answer)
- At least ten years of appraisal experience
- A graduate degree in real estate or finance
Correct answer: Competency to complete the assignment or a plan to acquire it
The Competency Rule requires appraisers to either have competency before accepting an assignment or to disclose the lack of it and acquire it during the assignment.
Question 2: Which element is NOT required to be in the workfile under USPAP's Record Keeping Rule?
- Copies of all written reports delivered to clients
- The appraiser's personal financial statements (Correct answer)
- All data, information, and documentation supporting the opinion of value
- Copies of engagement letters or contracts
Correct answer: The appraiser's personal financial statements
Personal financial statements are not required workfile contents; the workfile must contain documentation supporting the appraisal conclusion.
Question 3: Appraisal fraud that involves inflating a property's value to facilitate a mortgage for more than the property is worth is called:
- Churning
- Flopping
- Overvaluation fraud (air loan scheme) (Correct answer)
- Collusion
Correct answer: Overvaluation fraud (air loan scheme)
Overvaluation fraud occurs when an appraiser inflates value to enable a borrower to obtain a larger loan than the property supports.
Question 4: An appraiser signs a certification in a report. This certification attests that:
- The client has approved the methodology used
- The statements of fact in the report are true to the appraiser's best knowledge (Correct answer)
- The government has reviewed and accepted the appraisal
- No errors exist in the comparable sales data
Correct answer: The statements of fact in the report are true to the appraiser's best knowledge
The USPAP-required certification attests that statements of fact are true to the appraiser's knowledge and the analysis is unbiased.
Question 5: Which scenario represents 'scope creep' that could create ethical issues in an appraisal engagement?
- Adding more comparable sales than originally planned
- Expanding work to include a feasibility study not requested by the client and billing for it without disclosure (Correct answer)
- Using two approaches to value when one was sufficient
- Performing a drive-by inspection instead of an interior inspection
Correct answer: Expanding work to include a feasibility study not requested by the client and billing for it without disclosure
Performing unrequested services and billing for them without client disclosure violates transparency and fee agreement obligations.
Question 6: Under state licensing law, an appraiser trainee may NOT:
- Inspect properties under supervising appraiser oversight
- Sign appraisal reports as the appraiser of record (Correct answer)
- Collect market data under supervision
- Assist in writing report sections under supervision
Correct answer: Sign appraisal reports as the appraiser of record
Trainees are not licensed or certified and cannot sign as the appraiser of record; reports must be signed by the supervising certified appraiser.
Question 7: The 'intended user' in an appraisal assignment is defined as:
- Only the client who ordered the appraisal
- The client and any other party the appraiser identifies as relying on the appraisal (Correct answer)
- Any member of the public who views the report
- The government agency overseeing the transaction
Correct answer: The client and any other party the appraiser identifies as relying on the appraisal
Intended users include the client plus any other parties identified by the appraiser as relying on the report for the intended use.
IACP Legal & Ethical Standards in Appraisal 3
Under the IACP code of conduct, an appraiser who accepts an assignment must ensure they possess: