IACP Legal & Ethical Standards in Appraisal 5 — Questions and Answers
Question 1: The Appraisal Foundation's Appraiser Qualifications Board (AQB) is responsible for:
- Writing USPAP standards
- Setting minimum education and experience requirements for appraiser credentials (Correct answer)
- Licensing individual appraisers in each state
- Investigating complaints against appraisers
Correct answer: Setting minimum education and experience requirements for appraiser credentials
The AQB establishes minimum criteria for appraiser education, experience, and examination that states must adopt for their licensing programs.
Question 2: An appraiser who knowingly uses a misleading comparable sale to support a predetermined value is most likely guilty of:
- A scope of work violation only
- Appraisal fraud and an Ethics Rule violation (Correct answer)
- A minor record keeping deficiency
- Competency Rule violation only
Correct answer: Appraisal fraud and an Ethics Rule violation
Knowingly using misleading data to support a predetermined conclusion constitutes appraisal fraud and violates USPAP's Ethics Rule.
Question 3: Which of the following correctly describes 'hypothetical condition' in an appraisal?
- A condition the appraiser assumes to be true based on research
- A condition that is contrary to what exists but assumed for the purpose of the analysis (Correct answer)
- An estimate of future market conditions
- An assumption about zoning that has not been verified
Correct answer: A condition that is contrary to what exists but assumed for the purpose of the analysis
A hypothetical condition is a condition assumed to be true for analysis purposes even though it is contrary to known reality.
Question 4: A lender asks an appraiser to exclude a flood zone adjustment because the borrower plans to purchase flood insurance. The appraiser should:
- Remove the adjustment since flood insurance eliminates the risk
- Retain the adjustment because flood zone status is a market-recognized factor affecting value (Correct answer)
- Consult with the AMC before making a decision
- Defer to the lender's underwriting guidelines
Correct answer: Retain the adjustment because flood zone status is a market-recognized factor affecting value
Flood zone designation affects market perception of value independently of insurance availability, and the adjustment must reflect market evidence.
Question 5: Under USPAP, an appraiser performing a business valuation must:
- Hold a state real property appraisal license
- Follow the same USPAP standards as real property appraisals
- Comply with USPAP Business Appraisal Standards (BAS) if applicable (Correct answer)
- Obtain special permission from the Appraisal Foundation
Correct answer: Comply with USPAP Business Appraisal Standards (BAS) if applicable
Business appraisals fall under USPAP's Business Appraisal Standards, which are separate from but structurally similar to real property standards.
Question 6: Which situation requires an appraiser to invoke the Departure Rule or adjust scope of work?
- The client requests a desktop appraisal instead of a full interior inspection (Correct answer)
- The appraiser disagrees with the client's intended use
- The property is outside the appraiser's normal geographic market area
- The fee offered is lower than the appraiser's typical rate
Correct answer: The client requests a desktop appraisal instead of a full interior inspection
A desktop appraisal limiting inspection scope requires explicit scope of work adjustment and disclosure of that limitation in the report.
Question 7: An appraiser who observes visible signs of environmental contamination during a property inspection is ethically required to:
- Ignore it if the client did not ask about environmental conditions
- Clean up the contamination before completing the inspection
- Disclose the observation in the report and address its potential effect on value (Correct answer)
- Refuse to complete the appraisal until an environmental remediation is done
Correct answer: Disclose the observation in the report and address its potential effect on value
USPAP requires appraisers to note and address observed conditions that may affect value, including apparent environmental contamination.
IACP Legal & Ethical Standards in Appraisal 5
The Appraisal Foundation's Appraiser Qualifications Board (AQB) is responsible for: