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
In the context of appraisal review, 'market conditions risk' is best described as the risk that:
Answer: Value conclusions may be outdated due to market changes between the effective date and loan closing
Market conditions risk arises when time elapses between an appraisal's effective date and the transaction, potentially making the value conclusion stale.
A reviewer examining a complex income-producing property appraisal should be most alert to capitalization rate support because:
Answer: Small changes in cap rate produce large swings in value via the income approach
Because value = NOI ÷ cap rate, even a 0.5% change in cap rate can shift the value conclusion by hundreds of thousands of dollars on large properties.
When reviewing an appraisal of a property in a declining market, which comparable sale characteristic is MOST important to verify?
Answer: Whether each comparable sale is within six months of the effective date
In a declining market, older sales may overstate value; recent sales are critical to capture the downward trend.
A residential appraisal shows no adjustment for time on comparables that are 8–14 months old during a period of 10% annual appreciation. The reviewer should flag this as:
Answer: A potentially overstated value due to missing market conditions adjustments
Failing to make upward market conditions adjustments on older sales in an appreciating market results in understating value, not overstating.
An appraiser's certification states the property was inspected, but the field review reveals the appraiser never entered the structure. This creates primary risk related to:
Answer: Misleading certification and potentially unreliable condition rating
A false certification that an inspection occurred undermines the reliability of condition-dependent value conclusions and may constitute misrepresentation.
A review appraiser is asked to determine the reliability of a market rent estimate used in a DCF analysis. The most important supporting document to request is:
Answer: A rent comparable survey with lease details
Market rent reliability is established through a rental comparable survey comparing lease terms, size, location, and condition of similar leased properties.
Under USPAP Standards Rule 3, a review appraiser who provides their own value opinion must:
Answer: Comply with the relevant Standards Rules for developing an appraisal
When a reviewer develops their own value opinion, USPAP SR 3-2(c) requires compliance with Standard 1 (residential) or Standard 2 (commercial) as applicable.