Risk Management & Mitigation 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 Risk Management & Mitigation flashcards as text
When an appraiser uses an extraordinary assumption that significantly affects value, the appraisal reviewer should primarily assess whether the assumption:
Answer: Is supported by market evidence or disclosed as speculative
Extraordinary assumptions must be supported by available evidence or clearly disclosed as speculative, per USPAP requirements.
A lender requests a desk review of an appraisal. The reviewer identifies that the subject property's neighborhood is in rapid transition but the appraiser made no mention of this. This omission is best characterized as:
Answer: A scope of work deficiency
Failing to analyze and report a neighborhood in transition represents a scope of work deficiency that could materially affect the credibility of the value conclusion.
Which condition most increases collateral risk for a mortgage lender reviewing an appraisal?
Answer: Market time for the subject type exceeds six months
Extended marketing time indicates weak demand, which increases collateral risk because the property may be difficult to sell if the lender must foreclose.
An appraisal review reveals the appraiser reconciled by simply averaging the three comparable sales without weighting. The primary risk this introduces is:
Answer: A value conclusion not supported by market logic
Mechanical averaging ignores each comparable's relative reliability and similarity, producing a value unsupported by reasoned market analysis.
A reviewer notices an appraisal was completed two months after the effective date stated in the report. Under USPAP, this is known as a:
Answer: Retrospective appraisal
A retrospective appraisal has an effective date prior to the date the appraisal is completed.
During a field review, the reviewer finds the subject property has an unpermitted addition containing a bedroom and bathroom. The primary risk concern is:
Answer: The gross living area calculation may be incorrect
Unpermitted additions are typically excluded from GLA calculations, meaning the appraiser may have overstated size and thus inflated value.
A reviewer assessing environmental risk would be MOST concerned with an appraisal that fails to note:
Answer: The subject's proximity to a dry cleaning facility on an EPA Superfund list
Proximity to a Superfund site is a significant environmental hazard that can materially impair property value and must be disclosed.