MRP Property Valuation & Appraisal 2 — Questions and Answers
Question 1: What document does the VA issue to communicate the appraiser's determined value of a property to the lender and borrower?
- Uniform Residential Appraisal Report
- Notice of Value (NOV) (Correct answer)
- Certificate of Eligibility
- Loan Guaranty Certificate
Correct answer: Notice of Value (NOV)
The VA issues a Notice of Value (NOV) that states the appraiser's opinion of value and any required repairs or conditions.
Question 2: When a VA appraisal comes in below the purchase price, what option is available to the veteran buyer?
- The buyer must automatically cancel the contract
- The buyer can invoke the VA escape clause and withdraw without penalty (Correct answer)
- The lender must increase the loan amount to cover the difference
- The seller is required by law to reduce the price to the appraised value
Correct answer: The buyer can invoke the VA escape clause and withdraw without penalty
The VA escape clause allows veteran buyers to withdraw from a purchase contract without forfeiting earnest money if the property appraises below the purchase price.
Question 3: Which appraisal approach is typically given the MOST weight for single-family residential properties used in VA loans?
- Income capitalization approach
- Cost approach
- Sales comparison approach (Correct answer)
- Gross rent multiplier approach
Correct answer: Sales comparison approach
The sales comparison approach is given the most weight for single-family homes because it best reflects actual market activity and buyer behavior.
Question 4: How long is a VA appraisal (Notice of Value) valid for loan purposes?
- 60 days
- 90 days
- 6 months
- 1 year (Correct answer)
Correct answer: 1 year
A VA Notice of Value is valid for 180 days (approximately 6 months) from the date it is issued.
Question 5: What is the term for the process where a VA-assigned appraiser inspects the property to ensure it meets Minimum Property Requirements (MPRs)?
- Home inspection
- VA appraisal with MPR review (Correct answer)
- Certificate of occupancy review
- Environmental hazard assessment
Correct answer: VA appraisal with MPR review
The VA appraisal process includes review of Minimum Property Requirements (MPRs) to ensure the property is safe, structurally sound, and sanitary.
Question 6: Under the cost approach to property valuation, what does 'depreciation' refer to?
- The decrease in loan principal over time
- The loss in value from any cause affecting improvements (Correct answer)
- The reduction in property taxes over time
- The decline in neighborhood desirability
Correct answer: The loss in value from any cause affecting improvements
Depreciation in the cost approach represents the loss in value of improvements due to physical deterioration, functional obsolescence, or external obsolescence.
Question 7: When a military member receives PCS orders and must sell quickly, how might this affect the property's market value determination?
- It increases the appraised value due to government backing
- A forced or distressed sale price should NOT be used as a comparable (Correct answer)
- The VA automatically adjusts the appraisal upward for PCS sales
- Quick sales from PCS moves are excluded from all MLS databases
Correct answer: A forced or distressed sale price should NOT be used as a comparable
Appraisers should not use distressed or forced sales as comparables because they do not reflect typical market conditions between willing buyers and sellers.
MRP Property Valuation & Appraisal 2
What document does the VA issue to communicate the appraiser's determined value of a property to the lender and borrower?