Chapter 4 - Ethics Rule, Competency Rule, and Record Keeping Rule

Question 1

The ethical obligations of USPAP apply to:

Answer 1

Individual Appraisers

Question 2

Bias is permitted in an appraisal as long as the bias is clearly disclosed in the report.

Answer 2

False

Question 3

In appraisal practice, advocating the cause or interest of any party or issue is:

Answer 3

Not permitted

Question 4

An appraiser is disclosing to a client the fact that she had previously appraised the subject property within the prior three years. When making this disclosure, the appraiser must be careful to:

Answer 4

Not disclose confidential information from the previous assignment

Question 5

An appraiser must disclose any service he or she provided regarding the subject property for a period of _________ prior to agreeing to perform the assignment.

Answer 5

Three years

Question 6

In a real property appraisal assignment prepared for a mortgage lender, an appraiser is permitted by USPAP to base his compensation for an appraisal assignment on:

Answer 6

Whether or not the report is transmitted to the client by the due date

Question 7

An appraiser has been asked to complete an appraisal assignment. The fee is to be paid only if the loan closes. According to USPAP, may the appraiser accept the assignment under these conditions?

Answer 7

No, the fee arrangement is an unethical contingency arrangement and violates the ETHICS RULE.

Question 8

An appraiser concludes that a subject property has functional inadequacies. This conclusion is:

Answer 8

An assignment result and must be treated as confidential

Question 9

In most cases, an appraiser may share __________ from an appraisal assignment with other appraisers without obtaining the client’s consent.

Answer 9

physical characteristics

Question 10

The Confidentiality section of the ETHICS RULE prohibits an appraiser from disclosing confidential information or _________ to unauthorized parties.

Answer 10

Assignment results

Question 11

Is it permissible to create a workfile after the report has been delivered?

Answer 11

No

Question 12

How must recognition of my significant appraisal assistance be included when there is no written report, but significant assistance was provided and documentation of my work is in the workfile?

Answer 12

The workfile of an oral report must include a signed certification stating the name of the person or persons providing significant appraisal assistance.

Question 13

The RECORD KEEPING RULE states, in part: The workfile must include…true copies of all written reports… Does a true copy have to include a signature on the certification?

Answer 13

Yes. A true copy is a replica of the report sent to the client.

Question 14

An appraiser completes an appraisal and transmits the report to the client. The report copy retained in the appraiser’s workfile does not have a signature affixed to it. Is this permissible under USPAP?

Answer 14

No, a true copy must include a signature

Question 15

Is an appraiser permitted by USPAP to create a workfile after transmitting the report to the client?

Answer 15

No

Question 16

An appraiser prepared an appraisal report in April 2019. He testified in court regarding the value of the property in January 2020. The decision was rendered in February 2020 and was appealed in April 2020. The appellate court heard the case in January 2021 and remanded the case for reconsideration by the lower court. Final disposition of the case occurred in September 2021. At a minimum, how long must the appraiser retain his workfile?

Answer 16

April 2024 (2 years minimum under judicial review, or 5 years standard from the date of the report, whichever is LATER)

Question 17

I just completed my first assignment for a new client, and the client is very angry and refusing to pay me. The client is a lender and the subject property is a mid-size office property that I am well qualified to appraise. However, the client says that I did not use the correct definition of market value (the one required by FIRREA) and that I did not follow other requirements for appraisals used by federally regulated institutions. The client did not tell me about these things when I started the assignment. I think that it is their fault and not mine. I said if they want to pay me more, I will re-do the report with the new requirements. Is the client or the appraiser correct? Has there been a violation of USPAP by the appraiser?

Answer 17

Client is correct. The appraiser has to know all the laws and regulations applicable to an assignment, independent of information from the client. This is reiterated by the Scope of Work Rule.

Question 18

Which statement best describes the word “competency” as it relates to appraisal practice?

Answer 18

It is fundamental to the definition of “appraiser.”

Question 19

An appraiser is asked to perform an assignment involving a property type with which he has had no previous experience or knowledge. The appraiser notifies the client of his inexperience and lack of knowledge and the means for overcoming both issues. The report does not, however, disclose any of this information, as the client specifically asked the appraiser to keep the information confidential. Has the appraiser complied with USPAP?

Answer 19

No. The COMPETENCY RULE requires that the lack of experience be disclosed in the report, and failure to do so is a violation of this Rule.

Question 20

I am a residential appraiser performing work for several Appraisal Management Companies. Often, I am asked to perform an appraisal assignment outside the geographic areas I am most familiar with. The assignments come with a requirement that a completed report be submitted within 48 hours or less. This time frame does not permit me to adequately research the subject property market. Is it permissible for me to agree to perform an assignment under these conditions?

Answer 20

The COMPETENCY RULE in USPAP requires appraisers to notify the client that they do not have the necessary competency to complete an assignment prior to agreeing to perform the assignment. Because your question states that the “time frame does not permit me to adequately research the subject property market,” you have already made the determination that becoming geographically competent for this assignment is a concern. The client must be notified, appropriate steps must be taken to become competent, and the lack of competency plus the steps taken to become competent must be disclosed in the assignment report. If an appraiser is not in a position to spend the necessary time in a market area to attain geographic competency, affiliation with a qualified local appraiser may be an appropriate response to ensure development of credible assignment results. Alternatively, the appraiser must decline the assignment. This situation is also addressed by the SCOPE OF WORK RULE in USPAP.

Question 21

In order to perform an assignment for which an appraiser initially lacks the knowledge and experience to complete competently, the appraiser must:

Answer 21

Disclose to the client, prior to agreeing to perform the assignment, the lack of knowledge or experience

Question 22

Which of these is NOT one of the steps required by USPAP when an appraiser wishes to perform an assignment for which he or she initially lacks the knowledge and experience?

• Disclose, in the report, the lack of knowledge and/or experience and the steps taken to complete the assignment competently
• Disclose the lack of knowledge and/or experience to the client
• Use a hypothetical condition to complete the assignment as though the appraiser already had the knowledge and experience
• Take steps necessary to obtain the necessary knowledge and experience

Answer 22

Use a hypothetical condition to complete the assignment as though the appraiser already had the knowledge and experience

Question 23

The requirement to create and maintain a workfile for an appraisal or appraisal review assignment applies to:

Answer 23

All appraisers, regardless of credential level

Question 24

Three appraisers work together on an appraisal assignment. What would NOT be an appropriate workfile arrangement under USPAP?

• The workfile is kept in a neutral location where all three appraisers will be able to access it.
• The workfile is posted on the Internet, so that anyone who wants to see it will be able to access it.
• Each appraiser maintains a copy of the workfile.
• One appraiser maintains custody of the workfile and the other two appraisers make access and retrieval arrangements.

Answer 24

The workfile is posted on the Internet, so that anyone who wants to see it will be able to access it.