Module 21

A property owner wants Louis to appraise a retail property as if the renovation is already complete. What assignment condition should Louis use in his scope of work? a hypothetical condition an assumption a renovation exception an extraordinary assumption

1

An appraiser has been asked to limit her research and analysis in an appraisal to the degree that she believes the limitation may affect the credibility of the assignment results. The appraiser's options include all the following EXCEPT perform the assignment as requested with a disclosure that the results may not be credible. use an extraordinary assumption about the absent information and analysis provided that credible assignment results can still be developed. modify the assignment conditions to expand the scope of work to include the necessary information and analysis. withdraw from the assignment.

1

Appraiser Joan was hired by the Smiths. Upon consulting with the Smiths, she learned that they plan to add a landscaped pond and retreat-style patio off their rear deck with an estimated cost at $17,000. While they are looking forward to the end result, they are concerned they will not be able to recapture the cost if they choose to sell their home down the line. What service can Joan provide for them? Acting as an appraiser, Joan can research the market to determine how the dwelling and updated landscaping will react in terms of value. Acting as a consultant, Joan can review the price of the dwelling as it currently is. She can also estimate the value by adding the landscaping in a separate valuation. Landscaping is considered temporary due to the amount of maintenance. Acting as an appraiser, she can establish the market value without including the landscaping. Acting as a reviewer, Joan can review two values: the value of the subject in the market without the landscaping, and the value of the subject with landscaping estimates based on local nursery costs. The combined value represents the market value.

1

City Mortgage Co. faxed an order for their borrower to Mary Johnson, a real estate appraiser. The borrower is the subject property's current tenant. City Mortgage Co. intends to use the appraisal in a market transaction allowing the tenant to purchase the property. Mary used Fannie Mae and Freddie Mac forms to complete the report. Who is the intended user? City Mortgage Co. Freddie Mac the borrower Fannie Mae

1

Isaiah performed an appraisal ordered by Wellford Mortgage when James and his wife refinanced with them. James phoned this morning requesting his wife's name be removed from the report. He would like to use the report in their divorce proceedings. After paying a heavy fee for his rush appraisal, he feels he is entitled to this change. How should Isaiah respond? Isaiah should decline James' request completely. The scope of work for James and his wife's refinance would have included the fact that the the intended use was to secure financing for the dwelling for Wellford Mortgage, not for James to determine his assets in the divorce. Isaiah should offer to accommodate James to use the appraisal for the divorce; however, the wife's name will have to remain. Even though the scope of work for James and his wife's refinance would have included the fact that the intended use was to secure financing for the dwelling, since James paid for the appraisal, he is entitled to use the appraisal for any purposes involving him. Isaiah should comply with what James has asked. The scope of work for James and his wife's refinance would have included the fact that the intended use was to secure financing for the dwelling. James, being the intended user, can order the scope of work to be adjusted for his new purpose. Isaiah should remove the wife's name and allow the report to be used for the divorce. Even though the scope of work for James and his wife's refinance would have included the fact that the intended use was to secure financing for the dwelling, since James paid for the appraisal, he is entitled to use the appraisal for any purposes involving him.

1

On May 3rd, Sarah placed an order for a dwelling at 455 2nd Street in Orrville. Jonathan, the appraiser, inspected the property May 7th per the owner's work schedule. At the time of inspection, the realtor provided a copy of the sales contract. The contract price of $210,000 was established as of May 1st. May 9th Jonathan examined the market and chose the comparable sales for the sales comparison approach. The file was completed on May 12th and emailed to Sarah. The effective date included in this report is May 7th. May 1st. May 12th. May 9th.

1

After accepting an assignment, an appraiser decided to change the extent of the property observation from an exterior-only inspection to a complete interior inspection. What aspect of development is affected and must be addressed by the appraiser? the intended use the scope of work assignment conditions the effective date

2

At the inspection, Jorge is told that the owner plans on adding a family room addition and wants it included in the appraised value. The client authorizes its inclusion. How should Jorge include the addition? nothing is required as the client authorized its analysis a hypothetical condition should be used an extraordinary assumption should be used a hypothetical assumption is needed

2

If a client wishes to change one or more of the elements of the assignment how should the appraiser react? readdress the appraisal fee quote because of the change so long as the assignment remains consistent, review the scope of work cancel the assignment because changes are not allowed no problem, accept the changes and proceed with the original scope of work

2

Marge and Jack are planning to refinance their rental property which is located next door to their home. The rental property is a one-story, two-bedroom, one-bathroom dwelling with no garage, and approximately 1,200 square feet of gross living area. Shortly after meeting with the loan officer, the appraiser contacted them and inspected the rental property. All the comparable sales used in the report are single-family dwellings located in the market area. The monthly rent was not addressed in the report. Which of the following indicate the best value for this property? income producing single family residence where the sales comparison approach receives the primary emphasis and the income approach receives the secondary emphasis single-family residence where the sales comparison approach is the primary method of valuation single-family residence where the income approach is the primary method of valuation income producing single family residence where the sales comparison approach and income approach are reconciled into a final valuation

2

Martin currently has his mortgage through First National Bank. Two months ago he refinanced for a lower rate. The appraised value at the time of refinancing was less than his assessed tax value. In the hope of lowering his taxes, he plans on giving the assessor a copy of the report. Can the report be used for this purpose? The scope of work for Martin's refinance would have included the intended use to secure financing for the dwelling. However, since Martin paid for the appraisal, he is entitled to use the appraisal for any purposes involving him. The scope of work for Martin's refinance would have included the intended use to secure financing for the dwelling. The intended user is First National Bank. The scope of work for Martin's refinance would have included the intended use to secure financing for the dwelling. Martin, being the intended user, can order the scope of work to be adjusted for his new purpose. The scope of work for Martin's refinance would not have included the intended use. Martin is the assumed user and is allowed to use the appraisal for any purpose pertaining to him.

2

Matt bought a home on Lake Eagle. Typically, one boating dock is shared between two homes in the neighborhood. An easement allows access to the dock. Matt is debating adding his own dock. The permit and construction cost are rather expensive, and he wants to see what impact it will have on the value. Matt ordered an appraisal thru Anne's Appraisal Service. What purpose should the report perform? The personal dock will not have an impact on value. The purpose of clearing up the easement should have primary emphasis. The purpose is to form an opinion of market value of the property under two scenarios: the value as if the personal dock was there and the price as if the dock was not. The purpose is to form an opinion of market value of the property under two scenarios: the value as if the easement did not exist and the value with the easement. The value can only be established if the personal dock is completed. The appraiser cannot assume the structure is completed.

2

Sue and Joe live on 4th Street in Freemont Lakes. They have recently agreed to sell their home to Joe's brother, Mike. The sale price that was indicated on the contract was what they felt the market value of the house was at the time of the sale. Mike has often helped Joe and his wife complete work on the property. At the time of inspection, Joe stated the real sales price was $20,000 less than the one reported on the contract in order to pay Mike for some of his work. What are the assignment conditions? There are no limiting conditions other than those required by Fannie Mae and Freddie Mac. The value is current and based on market trends within a typical market time. The appraiser should reduce the market value by $20,000. Limiting conditions are placed on the market value due to the improvement estimate performed by Mike. The appraiser should follow the requirements presented by Fannie Mae and Freddie Mac. Base the value on market trends and deduct $20,000 from the value indicated by the sales comparison approach. There are no limiting conditions other than those required by Fannie Mae and Freddie Mac. The value is current and based on market trends within a typical market time. The appraiser should not deduct $20,000 from the market value and call the lender to discuss. Limiting conditions are placed on the market value due to the improvement estimate performed by Mike. The appraiser should follow the requirements presented by Fannie Mae and Freddie Mac. The value is current and based on market trends within a typical market time. The appraiser should not deduct $20,000 from the market value.

2

The decision to exclude an approach to value is part of the assignment elements decision. the scope of work decision. the intended use decision. the report format decision.

2

Who may be identified as an intended user in a real property appraisal assignment? all of these answers the party the appraiser identifies by name or type as a user of the appraisal report anyone the client decides should be an intended user the client

2

First State Mortgage has foreclosed on an older, single-family dwelling located in a commercially zoned area in the central business district of Ketching. First State Mortgage has requested Linda develop an opinion of value. Linda, careful in creating her scope of work, should act as an appraiser. This will not require her to address the highest and best use issue. find the highest and best use of the property to arrive at an opinion of value by acting as a reviewer. check her competency and then consider the highest and best use of the property by acting as a consultant. This may include valuations of the several property types the zoning would support. ignore the zoning due to the fact that the current use is single family. By acting as a consultant, she can relay this information to her client and then act as an appraiser to establish a value on the single family dwelling.

3

Roger is selling his home on 14th Street. He has decided to include the kitchen and laundry room appliances in the selling price. He provided copies of the original purchase receipts to his appraiser. How should the appraiser treat this information? The appliances would be considered real property along with the structure as they are attached by hook ups. The final estimate of value would represent the value of the structure plus the cost of the appliances. The home is considered personal property, and the scope of work will address this. The appliances are considered real property since they can be moved. Appliances are considered personal property. The appraiser is developing an opinion of real property, the structure, and attached improvements. Thus, the information provided about the appliances should be disregarded when determining the market value of the real estate. Research on the brand names of the appliances would need to be included. Quality and warranties on appliances could have an impact on value. The value of the appliances and structure should be established as they are all attached, real property.

3

Russell has excluded an approach to value that was not applicable in the assignment he was working on. What is true about Russell's decision? it must be agreed to by the client excluding an approach to value is a decision that the appraiser cannot make it is part of the scope of work determination the appraiser may face disciplinary action if caught3

3

The day before the appraiser was scheduled to inspect Dan's property, a pipe on the 2nd level sprung a leak. Dan turned off the water but did not call a plumber to fix the leak. When Cheryl, the appraiser, showed up to perform the inspection, the dining room ceiling was still dripping water. Several fans were drying the area. What will Cheryl include in her appraisal report? the extraordinary condition that the leak is fixed and no repairs are necessary Cheryl does not need to report the water situation as Dan is in the process of correcting the damage the hypothetical condition that the leak is fixed and no repairs are necessary the extraordinary assumption that the leak is fixed and no repairs are necessary

3

Pat is applying for a loan with City Tree to secure a lower interest rate. An appraiser is called in to establish the value of Pat's home. They will loan him up to 80% of his appraised value. Joan performs the appraisal, and includes what cited characteristic? the subject is real property the purpose is an opinion of market value as defined by Fannie Mae and Freddie Mac fee simple ownership the extraordinary assumption that there are no external factors in the unseen area

3 The cited characteristic is single-family, fee simple interest

After reading Devin's appraisal report, an identified intended user of the report was confused as to the extent of analysis performed in the appraisal. What error did the Devin potentially commit in this instance? The appraiser did not commit an error in this instance so long as the client was not confused. The appraiser should not have identified the individual who was confused as an intended user in the appraisal report. The scope of work disclosed in the report must be the actual work performed rather than what is proposed. The report must contain enough information to allow the intended users to understand the scope of work the appraiser performed.

4

Bob was asked by an attorney to complete an appraisal to be used in the filing of Mr. Smith's estate taxes. The property was inspected on March 15. The date of Mr. Smith's passing was January 2. How should Bob refer to the effective date of the appraisal? He should post date the inspection and the report to January 2. He should appraise the property as of March 15 and call it a current appraisal. He should call the effective date a prospective date. He should call the effective date a retrospective date.

4

Derek purchased a single-family dwelling on 17th Street. One month after he moved in, he had a survey performed in order to put up a fence. The survey found that the neighbor's garage was placed ten feet onto Derek's property. Derek is concerned the smaller lot size will impact the value of his home. He has requested that Sam performs an appraisal on his property. Sam's scope of work will include the extraordinary assumption that the encroachment is settled, and the legal description is adjusted to indicate the smaller lot size. the extraordinary condition that the encroachment is settled, and the legal description is adjusted to indicate the smaller lot size. a statement that the report cannot be prepared until the legal description is adjusted appropriately. the hypothetical condition that the encroachment is settled, and the legal description is adjusted to indicate the smaller lot size.

4

Leslie Anderson is planning to sell her home by owner. Without the help of a realtor to determine an asking price, she is not sure what amount to accept for the home. Leslie contacted Tri-City Appraisal Service for advice. Three days after the appraiser inspected the property, Leslie informed him that the neighbor's son offered to purchase the dwelling for $175,000. The offer is subject to the property appraising for at least that amount. In this scenario, who is the intended user of the appraisal? The Mortgage Company financing the neighbor's son for the purchase of a mortgage transaction is the intended user. Tri City Appraisal Service is the intended user, as they performed the appraisal. The neighbor's son is the intended user due to the fact that he has to establish a value to purchase the property. Leslie Anderson is the client and intended user. The intended use is to provide the market value for the owner's property.

4

Maureen is reviewing the elements of problem identification as part of her scope of work decision in an appraisal assignment. In this process, Maureen must consider six specific elements. Which of the following is NOT one of the elements of Step 1 of the Valuation Process? identification of the client and any other intended users assignment conditions type and definition of value identification of the assignment due date

4

Randy has just spent $60,000 on a PVC no maintenance deck and fence and a small in-ground four-foot deep pool. The pool was installed to help his elderly mother keep in shape. Randy had his home appraised six months before he started this project. The estimated value at that time was $205,000. Michael is excited to see how much additional value he has earned. He feels the new exterior additions should be at least equivalent to their cost, which would indicate that his market value should be at least $265,000. What assignment conditions, if any, does this situation present? Limiting conditions are placed on the market value due to the cost of the improvements. The appraiser should follow the requirements presented by Fannie Mae and Freddie Mac and base the value on market trends adjusting $60,000 in the sales comparison approach. Cost always equals value in a comparison approach. Limiting conditions are placed on the market value due to the need to reach a particular number. The appraiser should follow the requirements presented by Fannie Mae and Freddie Mac. The improvements will contribute some value; however, cost does not always equal value. This situation presents no assignment conditions other than the limiting conditions that are required by Fannie Mae and Freddie Mac. The value is current and based on market trends within a typical market time. The appraiser should adjust at least $60,000 for the improvements. Cost always equal value. This situation presents no assignment conditions other than the limiting conditions that are required by Fannie Mae and Freddie Mac. The value is current and based on market trends within a typical market time. The improvements will contribute some value; however, cost does not always equals value.

4

Tony purchased a two-story, brick dwelling in the central business district of Morton. The property consists of two apartments on the upper level and a commercial area on the main level. Tony plans to open an antique shop in the commercial area and continue the lease on the two apartments upstairs. He will not occupy either of the upstairs apartments as he already has a primary residence located nearby. Which is the best-cited characteristic to be addressed in the scope of work? lease simple leasehold fee simple lease fee

4

You have been asked to appraise a mixed-use building with three apartments and a beauty salon. The owner occupies the salon, the apartments are rented to university students on annual leases. What ownership would be conveyed if the property were sold? fee simple leased fee simple leasehold leased fee

4

You receive an order for a "full" appraisal on a residential property. You try to make an appointment but are rebuffed by the occupant. The client changes the order to an "exterior only" appraisal. What part the development process changes? the intended user the report format the purpose of the appraisal the scope of work

4

An appraiser may act as an advocate in an appraisal so long as the bias is not obvious. True False

T

The City has asked you to appraise a vacant former service station. You are uncertain about its environmental status and use an extraordinary assumption. True False

T

The owner stating a roof repair has been completed without a receipt for the repair requires an extraordinary assumption. True False

T

The type and definition of value are part of the purpose of the appraisal. True False

T