Appraisals

Question 1

What is an appraisal?

Answer 1

It’s a rough estimate of how much the home is worth. Mortgage lenders require that an appraisal be completed prior to signing on a home loan. The appraisal assures the lender that they aren’t lending more money than what the home is worth. Will be done by an independent thrid party appraiser.

Question 2

What is an appraiser?

Answer 2

A person that develops an opinion of the market value or other value of a product, most notably real estate. An appraiser must be licensed or certified by the State in which the property to be appraised is located.
Uniform Standars of Professional Appraisal Practices (USPAP)

Question 3

An appraisal is valid for _____ months and if the appraisal is ______months or more old, then it must be recertified.

Answer 3

6 months, 4 months, 442 recertification form.

Question 4

What is an appraisal contingency?

Answer 4

A contingency in a sales contract that the property must appraise at a value that is equal to or greater than your offering price.

Question 5

What are the three common methods an appraiser will use to determine value?

Answer 5

● Sales comparison approach (Market approach) ● Income approach (Capitalization) ● Cost approach

Question 6

What method is used in the real estate industry that compares one property to similar ones recently sold in the area?

Answer 6

Sales comparison approach (Market Approach)

Question 7

What’s the minimum amount of comparison properties an appraiser has to use?

Answer 7

3 comparisons that have sold within the last 6 months and have to be within 1- 3 miles of the subject property.
Can be active or pending listing.

Question 8

Lenders typically require that any adjustments that exceed ____% line, _____% net, or ______% gross must be explained and reconciled in the report to show the need for such dissimilar comparables.

Answer 8

10%, 15%, 25%

Question 9

After the appraiser selects the comps, they compare them all to each other. They then make adjustments based on differences in what?

Answer 9

Upgrades, size, features, sales date, and more. They then calculate the adjusted value for the subject property that reflects the home’s true value.

Question 10

What is the Principle of Substitution?

Answer 10

It’s the maximum value of a property usually established by the cost of acquiring an equivalent substitute property that has the same use, design, and income.
Is use din Sales and Coast Approach

Question 11

What is income approach?

Answer 11

Estimate the value of a property based on the income the property generates and other factors. It’s used by taking the net operating income (NOI) of the rent collected and dividing it by the capitalization rate.

Question 12

What is the cost approach?

Answer 12

It’s the method used in the real estate industry that estimates the price a buyer should pay for a piece of property which is equal to the cost to build an equivalent building.

Question 13

When dealing with vacant land when would appraisers use a cost approach?

Answer 13

When there is a home being built within the first 2 years.

Question 14

What is Appraiser Independence Requirements (AIR) commonly known as?

Answer 14

Home Valuation Code of Conduct (HVCC)

Question 15

Mortgage brokers are unable to choose an appraiser on what types of mortgages? And what act is it under?

Answer 15

The Dodd Frank Act has since extended this enforcement to include all mortgages.

Question 16

The appraiser independence requirements (AIRs) were designed to prevent what?

Answer 16

Attempting to influence the development, reporting, result, or review of an appraisal through coercion, extortion, collusion, compensation, inducement, intimidation, bribery, or in any other manner.

Question 17

Appraisal Waiver

Answer 17

Can be issued through AUS
Meet certain qualifications to skip the appraisal
Refinances and convential loans