CRU CRU Property Appraisal & Valuation 1 — Questions and Answers
Question 1: Which appraisal approach estimates a property's value by analyzing the cost to replace or reproduce the improvements minus depreciation, plus land value?
- Sales comparison approach
- Income capitalization approach
- Cost approach (Correct answer)
- Gross rent multiplier approach
Correct answer: Cost approach
The cost approach values a property by estimating the land value plus the depreciated cost of reproducing or replacing the improvements.
Question 2: An appraiser identifies three comparable sales that bracket the subject property's value. What is the primary purpose of 'bracketing' in the sales comparison approach?
- To average the three sale prices together
- To ensure comparables bound the subject above and below in key characteristics (Correct answer)
- To exclude outlier sales from analysis
- To meet USPAP minimum comparable count requirements
Correct answer: To ensure comparables bound the subject above and below in key characteristics
Bracketing means selecting comparables with features both superior and inferior to the subject to support value adjustments from both directions.
Question 3: Which of the following best describes 'effective age' in a residential appraisal?
- The actual number of years since the home was built
- The age implied by the property's condition and utility relative to new construction (Correct answer)
- The age used by the IRS for depreciation schedules
- The date of the last major renovation
Correct answer: The age implied by the property's condition and utility relative to new construction
Effective age reflects how old the property appears functionally and physically, which may differ from its actual chronological age.
Question 4: A residential property has a swimming pool while none of the comparable sales do. How should the underwriter treat this during appraisal review?
- Reject the appraisal for lack of comparable pools
- Require the appraiser to add a positive adjustment to the comparables (Correct answer)
- Accept the appraisal only if the pool is in-ground
- Ignore the pool since amenities have no market value
Correct answer: Require the appraiser to add a positive adjustment to the comparables
Because the subject has a feature the comparables lack, the appraiser must add value to the comparables to make them equivalent to the subject.
Question 5: Under FNMA guidelines, what is the maximum age of an appraisal report that can be used for a conventional loan at the time of note date?
- 90 days for existing construction
- 12 months for all property types
- 6 months for existing and 12 months for new construction (Correct answer)
- 180 days for all property types
Correct answer: 6 months for existing and 12 months for new construction
Fannie Mae allows appraisals up to 12 months old for new construction and up to 12 months for existing properties when an appraisal update is provided, but the standard effective date limit is 12 months with updates permitted.
Question 6: Which form is most commonly used by appraisers for a standard single-family residential appraisal on a conventional loan?
- Form 1025
- Form 1004 (Correct answer)
- Form 1073
- Form 2055
Correct answer: Form 1004
Fannie Mae Form 1004 (Uniform Residential Appraisal Report) is the standard form for single-family properties.
CRU CRU Property Appraisal & Valuation 1
Which appraisal approach estimates a property's value by analyzing the cost to replace or reproduce the improvements minus depreciation, plus land value?