IACP Legal & Ethical Standards in Appraisal 4 — Questions and Answers
Question 1: An appraisal management company (AMC) pressures an appraiser to remove a downward adjustment for a deteriorating neighborhood. The appraiser should:
- Remove the adjustment to maintain the business relationship
- Comply if the AMC provides written instructions
- Refuse and report the pressure to the appropriate state board if it persists (Correct answer)
- Rewrite the report using a different approach that avoids the adjustment
Correct answer: Refuse and report the pressure to the appropriate state board if it persists
Yielding to pressure to alter conclusions violates independence; persistent coercion should be reported to the state appraiser regulatory board.
Question 2: The concept of 'arms-length transaction' is critical in comparable selection because:
- It ensures both parties are related by family or business
- It confirms the sale was conducted under normal market conditions without duress (Correct answer)
- It verifies the property is located within one mile of the subject
- It guarantees financing terms were conventional
Correct answer: It confirms the sale was conducted under normal market conditions without duress
Arms-length transactions reflect market value because both parties acted prudently, without unusual motivation or duress.
Question 3: Which federal law prohibits appraisers from discriminating based on racial composition of a neighborhood?
- RESPA
- FIRREA
- Fair Housing Act and Equal Credit Opportunity Act (Correct answer)
- Truth in Lending Act (TILA)
Correct answer: Fair Housing Act and Equal Credit Opportunity Act
The Fair Housing Act and ECOA prohibit appraisers from considering race, color, national origin, or other protected characteristics in valuation.
Question 4: An appraiser who is asked to appraise a property type they have never appraised before should:
- Decline the assignment without explanation
- Accept and complete the assignment without disclosing the lack of experience
- Disclose the lack of experience to the client and either acquire competency or decline (Correct answer)
- Complete the assignment and disclose inexperience only in the certification
Correct answer: Disclose the lack of experience to the client and either acquire competency or decline
USPAP's Competency Rule requires disclosure of inexperience to the client prior to acceptance and a plan to acquire competency.
Question 5: Under USPAP, the minimum record retention period for workfiles after delivery of the final opinion is:
- 1 year
- 3 years
- 5 years (Correct answer)
- 7 years
Correct answer: 5 years
USPAP requires workfiles to be retained for at least five years after preparation or two years after final disposition of legal proceedings, whichever is longer.
Question 6: A 'restricted appraisal report' under USPAP is appropriate when:
- The client is a government agency requiring full disclosure
- The intended users are limited to the client only (Correct answer)
- The property is complex and requires extensive analysis
- Multiple parties will rely on the appraisal for lending purposes
Correct answer: The intended users are limited to the client only
A Restricted Appraisal Report may be used only when the client is the sole intended user, as it contains minimal reporting detail.
Question 7: When an appraiser provides a value opinion that is later found to be fraudulent, potential legal consequences include:
- Only loss of certification with no civil liability
- Criminal charges, civil liability, and license revocation (Correct answer)
- A formal reprimand with no financial penalty
- Mandatory continuing education with no other sanctions
Correct answer: Criminal charges, civil liability, and license revocation
Appraisal fraud can result in criminal prosecution under federal wire/mail fraud statutes, civil damages, and revocation of state certification.
IACP Legal & Ethical Standards in Appraisal 4
An appraisal management company (AMC) pressures an appraiser to remove a downward adjustment for a deteriorating neighborhood.
The appraiser should: