Appraisal Reviewer Risk Assessment Flashcards
7 cards from real CAR practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Appraisal Reviewer Risk Assessment flashcards as text
A lender's appraisal review policy requires a second appraisal when the first appraisal's value exceeds a certain threshold above the purchase price. This policy is primarily designed to mitigate:
Answer: Collateral overvaluation risk that could result in an under-secured loan
A significant upward variance from the contract price may indicate overvaluation; a second appraisal provides an independent check on collateral adequacy.
Which of the following appraisal characteristics would a reviewer flag as a potential indicator of appraisal fraud?
Answer: Comparable sales photos in the report appear to be of the subject property rather than the comparables
Using subject property photos in place of comparable property photos is a common fraud indicator suggesting the comparables may be fictitious.
When reviewing a 'subject to' appraisal for a renovation loan, what is the primary risk if the reviewer does not verify the hypothetical condition is clearly stated?
Answer: The lender may fund the loan based on an 'as-is' value rather than the intended completed value
If the hypothetical condition is unclear, the lender may confuse the 'as-is' and 'as-completed' values, funding a loan on collateral that does not yet support the value used.
An appraisal reviewer assessing market risk should consider which of the following as the most relevant indicator of a declining market?
Answer: Increasing days on market combined with a rising number of listings
Rising days on market and increasing inventory are classic leading indicators of a buyer's market and declining price pressure.
In a portfolio review, a reviewer identifies a cluster of appraisals in the same subdivision all completed by the same appraiser with unusually similar adjustments. The most appropriate risk response is:
Answer: Flag the cluster for potential bias or templated reporting and conduct deeper due diligence
Identical adjustments across multiple appraisals may indicate templated, unsupported work rather than genuine market analysis, warranting deeper investigation.
Under the Interagency Appraisal and Evaluation Guidelines, a regulated institution's appraisal review function must be independent. The primary reason for this independence requirement is:
Answer: To prevent loan production staff from influencing collateral value conclusions
Independence insulates the collateral valuation process from loan production pressure, reducing the risk of inflated values driven by deal-closing incentives.
A reviewer completing a compliance review determines the appraisal meets all USPAP requirements but is not credible given current market conditions. The reviewer's opinion of value differs from the appraiser's by 12%. The reviewer should:
Answer: Report that the appraisal is USPAP-compliant but not credible and provide their own supported value opinion
A review can conclude an appraisal is procedurally compliant but substantively non-credible; when the reviewer disagrees, they must disclose and support their own value opinion.