CAR Foundational Concepts & Principles 2 — Questions and Answers
Question 1: Which principle states that value is created and sustained when the characteristics of a property conform to the demands of its market?
- Principle of Contribution
- Principle of Conformity (Correct answer)
- Principle of Substitution
- Principle of Progression
Correct answer: Principle of Conformity
The principle of conformity holds that maximum value is realized when a property's use and style conform to those of surrounding properties in the same market area.
Question 2: An appraisal reviewer identifies that an appraiser used a 20-year-old zoning map that has since been updated. This is best described as a failure related to which appraisal principle?
- Principle of Change (Correct answer)
- Principle of Balance
- Principle of Anticipation
- Principle of Surplus Productivity
Correct answer: Principle of Change
The principle of change recognizes that economic and social forces constantly alter property values, requiring appraisers to use current market data.
Question 3: Under USPAP, which term describes the process of developing and communicating an opinion of value?
- Appraisal review
- Appraisal consulting
- Appraisal practice (Correct answer)
- Appraisal assignment
Correct answer: Appraisal practice
USPAP defines 'appraisal practice' as valuation services performed by an individual acting as an appraiser, including appraisal, appraisal review, and appraisal consulting.
Question 4: The concept that a property's value is influenced by the economic productivity remaining in its competitive life is most directly tied to which principle?
- Principle of Regression
- Principle of Increasing Returns
- Principle of Anticipation (Correct answer)
- Principle of Externalities
Correct answer: Principle of Anticipation
The principle of anticipation holds that value is the present worth of future benefits, including the remaining economic life of the improvements.
Question 5: Which type of value is most commonly the focus of federally regulated real estate transactions and is defined as the most probable price a property would sell for in a competitive, open market?
- Assessed value
- Investment value
- Market value (Correct answer)
- Insurable value
Correct answer: Market value
Market value is the standard required for federally related transactions under FIRREA and represents the most probable price in an arm's-length transaction.
Question 6: A reviewer notes that the subject appraisal did not disclose a prior service by the same appraiser on the property. Which USPAP rule does this most likely violate?
- Competency Rule
- Scope of Work Rule
- Ethics Rule — Management section (Correct answer)
- Ethics Rule — Record Keeping section
Correct answer: Ethics Rule — Management section
USPAP's Ethics Rule — Management section requires appraisers to disclose prior services on the same property within the prior three-year period.
Question 7: When reviewing an appraisal, the CAR must determine whether the appraiser's scope of work was adequate. Which USPAP standard primarily governs this determination?
- Standard 1
- Standard 2
- Standard 3 (Correct answer)
- Standard 4
Correct answer: Standard 3
Standard 3 governs appraisal review and requires the reviewer to evaluate whether the scope of work in the work under review was appropriate for the intended use.
CAR Foundational Concepts & Principles 2
Which principle states that value is created and sustained when the characteristics of a property conform to the demands of its market?