Loan Officer Exam Loan Officer Appraisal and Property Valuation 1 — Questions and Answers
Question 1: How is 'market value' defined in real estate appraisal?
- The price a seller hopes to receive for their property
- The most probable price a property should bring in a competitive and open market (Correct answer)
- The assessed value assigned by the local tax authority
- The replacement cost of the improvements on the property
Correct answer: The most probable price a property should bring in a competitive and open market
Market value is defined as the most probable price a property should bring in a competitive and open market under conditions requisite to a fair sale between a willing buyer and seller.
Question 2: Which federal law requires lenders to provide mortgage applicants with a free copy of any written appraisal developed for a first-lien dwelling loan?
- RESPA
- TILA
- ECOA (Correct answer)
- FIRREA
Correct answer: ECOA
ECOA (Regulation B), as amended by Dodd-Frank, requires lenders to provide applicants with a free copy of any written appraisal or valuation for a first-lien mortgage loan.
Question 3: What does an 'as-is' appraisal reflect?
- The property's projected value after planned renovations are complete
- The property's value in its current physical condition at the time of appraisal (Correct answer)
- An estimate of value assuming all deferred maintenance is repaired
- The value assigned by the seller based on recent comparable sales
Correct answer: The property's value in its current physical condition at the time of appraisal
An 'as-is' appraisal reflects the property's value in its existing condition at the time of inspection, without assuming any future repairs or improvements.
Question 4: What does the abbreviation 'URAR' stand for in mortgage lending?
- Universal Real Appraisal Report
- Uniform Residential Appraisal Report (Correct answer)
- United Realty Assessment Record
- Underwriter's Real Asset Review
Correct answer: Uniform Residential Appraisal Report
URAR stands for Uniform Residential Appraisal Report (Fannie Mae Form 1004), the standard form used to document appraisals of single-family residential properties.
Question 5: Which organization establishes the Uniform Standards of Professional Appraisal Practice (USPAP) that govern federally related transactions?
- Federal Housing Administration (FHA)
- Appraisal Subcommittee (ASC)
- The Appraisal Foundation (Correct answer)
- Federal Reserve Board
Correct answer: The Appraisal Foundation
The Appraisal Foundation, a congressionally authorized nonprofit, establishes USPAP, which sets the minimum ethical and performance standards for appraisers in federally related transactions.
Question 6: A 'drive-by' appraisal is best described as which type of appraisal?
- An automated valuation model generated without any site visit
- An exterior-only inspection appraisal where the appraiser does not enter the property (Correct answer)
- A broker price opinion prepared by a real estate agent
- A desktop appraisal based entirely on public records
Correct answer: An exterior-only inspection appraisal where the appraiser does not enter the property
A drive-by appraisal (Form 2055) involves the appraiser observing the property's exterior from the street without entering, providing a limited scope of inspection.
Question 7: Under FIRREA, which real estate transactions require an appraisal by a state-licensed or state-certified appraiser?
- All real estate sales regardless of transaction amount
- Non-federally related private transactions only
- Federally related transactions that exceed established de minimis thresholds (Correct answer)
- Only commercial property transactions above $500,000
Correct answer: Federally related transactions that exceed established de minimis thresholds
FIRREA requires that federally related transactions exceeding de minimis thresholds established by federal regulators must use state-licensed or state-certified appraisers.
Loan Officer Exam Loan Officer Appraisal and Property Valuation 1
How is 'market value' defined in real estate appraisal?