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ASFMRA RPRA practice questions

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Question 1Real Property Review Appraisal Practice

In a review appraisal, the reviewer's primary objective is to determine whether the work under review is:

  1. favorable to the property owner's position
  2. supportable and compliant with applicable standards Correct answer.
  3. more conservative than the reviewer's own value
  4. consistent with the client's lending policy

Explanation

A review appraisal evaluates the adequacy and appropriateness of another appraiser's work, including whether the analysis, opinions, and conclusions are supportable and comply with USPAP. The reviewer does not simply substitute a preferred value or advocate for a party. The measure is credibility and support, not conservatism or advocacy.

Question 2Real Property Review Appraisal Practice

An appraiser is engaged to review a report and reaches a different opinion of value than the original appraiser. Under USPAP, the reviewer must:

  1. request that the original report be withdrawn
  2. automatically adopt the original appraiser's value
  3. report the reviewer's own value conclusion only if the assignment requires it Correct answer.
  4. withhold any differing opinion to avoid conflict

Explanation

A review assignment's scope determines whether the reviewer must develop and report an independent value opinion. If the engagement only calls for a review of the work, the reviewer reports on the quality of the work; if it also calls for the reviewer's own opinion, that opinion must be developed and reported. The reviewer is not required to conceal differences or adopt the original value.

Question 3Real Property Review Appraisal Practice

Which element is most essential for a reviewer to obtain before evaluating the reasonableness of a comparable sale relied upon in the report under review?

  1. the original appraiser's fee schedule
  2. the listing history of the subject property
  3. the buyer's personal financial statement
  4. verification of the sale's terms and conditions Correct answer.

Explanation

Reviewers must confirm that comparable sales are truly arm's-length and accurately described, which requires verifying transaction terms, conditions, and data. Fee schedules and buyer financials are generally irrelevant to the market analysis. Listing history of the subject bears on the subject, not on the reliability of a comparable sale.

Question 4Real Property Review Appraisal Practice

When a reviewer finds an error in the report under review that does not materially affect the value conclusion, the appropriate action is to:

  1. ignore the error entirely
  2. reject the report as wholly unreliable
  3. recompute the entire appraisal from scratch
  4. note the error and assess its effect on credibility Correct answer.

Explanation

Reviewers should identify errors and evaluate whether they affect the credibility of the analyses or conclusions. Immaterial errors are noted but do not necessarily invalidate the report. Ignoring errors or rejecting the entire report overstates or understates their significance.

Question 5Real Property Review Appraisal Practice

A reviewer is evaluating a highest and best use conclusion for a vacant parcel zoned for retail use. Which test is applied first in the standard four-test sequence?

  1. maximally productive
  2. physically possible
  3. financially feasible
  4. legally permissible Correct answer.

Explanation

The four tests of highest and best use are applied in sequence: legally permissible, physically possible, financially feasible, and maximally productive. Legal permissibility is evaluated first because uses that cannot legally occur need not be analyzed further. The remaining tests follow only for uses that pass the prior test.

Question 6Real Property Review Appraisal Practice

In reviewing an income approach, a reviewer notices the appraiser used a capitalization rate derived from a source with no stated support. The reviewer should:

  1. question the rate's support and test its effect on value Correct answer.
  2. accept the rate because it is within market range
  3. replace the rate with the reviewer's preferred rate without comment
  4. disregard the income approach entirely

Explanation

Reviewers must assess whether each conclusion is supported by market evidence and evaluate the sensitivity of the value opinion to unsupported inputs. A rate that lacks documentation should be questioned and tested, not accepted merely because it falls in a range. Substituting a rate without disclosure or discarding the approach overreaches.

Question 7Real Property Review Appraisal Practice

A reviewer is asked to evaluate whether the sales comparison approach in the report under review adequately reflects market conditions. The most direct evidence would be:

  1. trend analysis of paired sales over time Correct answer.
  2. the lender's loan-to-value ratio
  3. the appraiser's professional experience
  4. the subject's original purchase price

Explanation

Market conditions adjustments should be supported by evidence of price change over time, such as paired sales analysis or trend data. The subject's prior purchase price and the appraiser's experience are not direct measures of market change. Loan-to-value ratios are lending metrics unrelated to market conditions.

Question 8Real Property Review Appraisal Practice

Which statement best describes the reviewer's obligation regarding the scope of work in a review assignment?

  1. Scope is set solely by the original appraiser
  2. Scope is irrelevant if the value is reasonable
  3. Scope must be identified and be sufficient for credible results Correct answer.
  4. Scope should remain undisclosed to the client

Explanation

The reviewer must identify the scope of work and ensure it is sufficient to produce credible assignment results. Scope is determined by the reviewer in light of the intended use and the client's needs, not by the original appraiser. Scope should be communicated in the review report.

Question 9Real Property Review Appraisal Practice

A reviewer discovers that the appraiser under review lacked competency for the property type but completed the assignment anyway. The most significant review finding is that the appraiser:

  1. relied on the cost approach
  2. used too many comparable sales
  3. charged an inappropriate fee
  4. failed to disclose and address a competency deficiency Correct answer.

Explanation

USPAP requires appraisers to disclose a lack of knowledge or experience and take steps to ensure competency before accepting or completing an assignment. The central deficiency is the failure to disclose and remedy the competency issue. Fee, number of comparables, and use of the cost approach are not the core problem.

Question 10Real Property Review Appraisal Practice

In reviewing a cost approach, a reviewer should be most concerned if the appraiser:

  1. measured physical deterioration without market extraction
  2. applied an entrepreneurial incentive to the cost new
  3. used replacement cost rather than reproduction cost Correct answer.
  4. estimated depreciation using observed condition and market data

Explanation

Replacement cost and reproduction cost are both acceptable cost concepts, but the choice must be appropriate to the assignment and consistently applied. The reviewer should be concerned when the method chosen is not justified or when results are inconsistent with the other approaches. Using market-supported depreciation and entrepreneurial incentive reflects accepted practice.

Question 11Real Property Review Appraisal Practice

A reviewer is assessing whether the report under review properly reconciled the approaches to value. The strongest indicator of an adequate reconciliation is that the appraiser:

  1. chose the highest indicated value
  2. relied exclusively on the cost approach
  3. averaged all approaches equally
  4. selected the approach most relevant to the property and market with stated reasoning Correct answer.

Explanation

Reconciliation requires reasoned judgment about which approach or approaches are most reliable given the property type, market conditions, and data quality. Mechanical averaging or selecting the highest value lacks analytical support. The reasoning should be stated in the report.

Question 12Real Property Review Appraisal Practice

Which of the following best describes the reviewer's handling of an extraordinary assumption in the report under review?

  1. The reviewer should treat it as a factual error
  2. The reviewer should delete the assumption from the report
  3. The reviewer should replace it with a hypothetical condition
  4. The reviewer should evaluate whether the assumption is clearly disclosed and necessary Correct answer.

Explanation

Reviewers assess whether extraordinary assumptions are clearly disclosed, reasonable, and necessary for the assignment. They do not unilaterally edit the report under review or convert assumptions into hypothetical conditions. An extraordinary assumption is not an error if properly disclosed and supported.

Question 13Real Property Review Appraisal Practice

A reviewer is reviewing a report where the effective date precedes the date of the inspection. This is most likely acceptable when:

  1. the report is for litigation
  2. the property has changed since inspection
  3. the client requests a retrospective value Correct answer.
  4. the appraiser forgot the inspection date

Explanation

Retrospective value opinions are permissible when the assignment requires a value as of a prior date. The effective date can precede the inspection date in that circumstance, provided the appraiser discloses and supports the retrospective analysis. The other situations describe errors or unrelated conditions.

Question 14Real Property Review Appraisal Practice

Which of the following is the best example of an unsupported adjustment in a sales comparison grid?

  1. a location adjustment based on matched pairs
  2. a condition adjustment supported by cost data
  3. an adjustment justified only by the appraiser's judgment with no market evidence Correct answer.
  4. a market-derived adjustment based on paired sales

Explanation

Adjustments should be derived from and supported by market evidence. An adjustment resting solely on judgment without market support is vulnerable on review. The other examples describe adjustments tied to market data or documented cost evidence.

Question 15Real Property Review Appraisal Practice

A reviewer examining a report's market analysis finds that the appraiser described the market only in general terms without linking it to the subject's submarket. The reviewer should conclude that the market analysis:

  1. should be deleted from the report
  2. is adequate because it mentions the market
  3. lacks sufficient relevance to support the subject's conclusions Correct answer.
  4. proves the value is too high

Explanation

Market analysis must be relevant to the subject property's competitive market and support the analyses that follow. A generic description that does not connect to the subject's submarket is insufficient. It does not automatically prove an incorrect value, nor should it be deleted.

Question 16Real Property Review Appraisal Practice

In evaluating a report's treatment of the subject's physical characteristics, the reviewer is most concerned with whether the appraiser:

  1. described the property in sufficient detail to support the analyses Correct answer.
  2. used a narrative rather than a form report
  3. included photographs of every room
  4. provided a floor plan

Explanation

The reviewer evaluates whether the description of the property is adequate to support the analyses and conclusions. Photographs, report format, and floor plans are means of presentation, not the substantive standard. Detail sufficient to support the analyses is the key criterion.

Question 17Real Property Review Appraisal Practice

A reviewer is assessing the reasonableness of an appraiser's exposure time conclusion. The most appropriate basis is:

  1. the appraiser's prior experience with similar properties
  2. market evidence of marketing periods for similar properties Correct answer.
  3. the subject's listing history alone
  4. the lender's required marketing period

Explanation

Exposure time should be supported by market evidence of how long similar properties take to sell under the stated conditions. Experience, lender requirements, and a single listing history are not substitutes for market-derived evidence. The reviewer should look for data-based support.

Question 18Real Property Review Appraisal Practice

When the reviewer concludes that the value opinion in the report under review is not credible, the review report should:

  1. report a value without explanation
  2. refuse to issue any review report
  3. report only the original appraiser's value
  4. state the reviewer's conclusion and the reasons for it Correct answer.

Explanation

A review report must state the reviewer's conclusions and the reasoning supporting them, including any disagreement with the original work. Refusing to report or omitting explanation fails the reviewer's reporting obligation. The reviewer's reasoning is essential to a credible review.

Question 19Real Property Review Appraisal Practice

A reviewer finds that the appraiser used a comparable sale that closed after the effective date of the appraisal. The reviewer should evaluate whether:

  1. the sale involved a licensed broker
  2. the sale was properly disclosed and its use justified Correct answer.
  3. the sale price was higher than the subject's value
  4. the sale was listed on a multiple listing service

Explanation

Sales occurring after the effective date may be used if appropriately disclosed and justified as evidence of market conditions at the effective date. The reviewer's concern is disclosure and support, not the relative price, broker licensing, or MLS status.

Question 20Real Property Review Appraisal Practice

Which action best reflects a reviewer maintaining independence during a review assignment?

  1. deferring to the property owner's opinion of value
  2. consulting the original appraiser about data sources Correct answer.
  3. accepting the client's preferred value as a benchmark
  4. adopting the lender's underwriting assumptions

Explanation

Independence is preserved when the reviewer forms conclusions based on evidence and may consult the original appraiser for data clarification without adopting predetermined outcomes. Accepting a client's preferred value, lender assumptions, or an owner's opinion would compromise independence.

Question 21Real Property Review Appraisal Practice

A reviewer evaluating a report's highest and best use analysis for an improved property should verify that the analysis considered:

  1. only new construction alternatives
  2. the owner's intended use
  3. only the current use
  4. whether the property as improved should be retained or changed Correct answer.

Explanation

For an improved property, highest and best use analysis must consider the property as improved, including whether continued use, modification, or demolition and redevelopment is appropriate. Considering only the current use or only new construction is incomplete. The owner's intent is not determinative.

Question 22Real Property Review Appraisal Practice

In a review of a report involving a proposed construction, the reviewer should confirm that the appraiser:

  1. used only the cost approach
  2. valued the property as if complete without stating assumptions
  3. ignored the plans and specifications
  4. clearly disclosed the hypothetical condition and its effect Correct answer.

Explanation

Appraisals of proposed construction typically rely on a hypothetical condition that the improvements are complete as of the effective date, which must be clearly disclosed. Failing to state the assumption or ignoring plans and specifications undermines the analysis. The cost approach is not the only permissible method.

Question 23Real Property Review Appraisal Practice

A reviewer notices that the report under review contains an internal inconsistency between the stated value and the value indicated in the reconciliation. The reviewer should:

  1. identify the inconsistency and assess its effect on credibility Correct answer.
  2. treat the inconsistency as immaterial
  3. report only the reconciliation figure
  4. correct the report and reissue it

Explanation

Internal inconsistencies bear directly on the credibility of the report and must be identified and evaluated. The reviewer does not edit or reissue the original appraiser's report. Treating a value inconsistency as immaterial or reporting only one figure would misrepresent the review findings.

Question 24Real Property Review Appraisal Practice

Which of the following best describes the appropriate use of a hypothetical condition in a review assignment?

  1. It may be used to avoid verifying data
  2. It may be used without disclosure to the client
  3. It may be used when a condition contrary to fact is necessary for analysis and is disclosed Correct answer.
  4. It may replace all extraordinary assumptions

Explanation

A hypothetical condition assumes something contrary to known fact and may be used only when necessary for the analysis and when clearly disclosed. It cannot be used to avoid verification or conceal assumptions. It does not substitute for extraordinary assumptions.

Question 25Real Property Review Appraisal Practice

A reviewer is evaluating an appraiser's conclusion that a property's value is supported primarily by the sales comparison approach. The strongest support for this conclusion would be that the property:

  1. is a special-purpose property with no comparable sales
  2. generates substantial rental income
  3. has significant deferred maintenance
  4. is a typical owner-occupied residential property with abundant sales data Correct answer.

Explanation

The sales comparison approach is most reliable for typical properties with abundant comparable sales data. Income-producing properties favor the income approach, and special-purpose properties may rely more on the cost approach. Deferred maintenance affects condition but not the choice of approach.

Question 26Real Property Review Appraisal Practice

Which document establishes the requirements for developing and reporting a real property review appraisal?

  1. USPAP Standards 5 and 6
  2. USPAP Standards 7 and 8
  3. USPAP Standards 3 and 4 Correct answer.
  4. USPAP Standards 1 and 2

Explanation

USPAP Standards 3 and 4 govern review appraisal development and reporting, respectively. Standards 1 and 2 apply to real property appraisal, Standards 5 and 6 to mass appraisal, and Standards 7 and 8 to personal property appraisal.

Question 27Real Property Review Appraisal Practice

In a review appraisal, the reviewer must develop an opinion about the quality of which aspect of the work under review?

  1. The appraiser's work only if the reviewer finds a material error
  2. Only the final value conclusion, not the process
  3. The completeness and adequacy of the appraiser's work Correct answer.
  4. The appraiser's compliance with client instructions exclusively

Explanation

A review appraisal requires the reviewer to form an opinion about the quality of the work under review, including its completeness and adequacy. The reviewer must consider the entire appraisal process, not just the final value or compliance with client instructions.

Question 28Real Property Review Appraisal Practice

When a reviewer is examining a report and finds that the appraiser did not analyze the effect of a pending zoning change, the reviewer should:

  1. Ignore the omission because zoning changes are not relevant to value
  2. Reject the report outright without further analysis
  3. Assume the appraiser confirmed the change is not significant
  4. Note the omission and consider its impact on the credibility of the value opinion Correct answer.

Explanation

The reviewer must identify any omissions in the appraisal and assess whether they affect the credibility of the value opinion. Simply ignoring the omission or assuming it is insignificant would not fulfill the reviewer's obligation.

Question 29Real Property Review Appraisal Practice

Which of the following is an example of an extraordinary assumption that a reviewer might encounter in a report under review?

  1. The property is subject to a pending sale
  2. The property is in a flood zone
  3. The property is free of hazardous materials Correct answer.
  4. The property is currently owner-occupied

Explanation

An extraordinary assumption is a condition that, if found to be false, could alter the appraiser's opinions or conclusions. Assuming a property is free of hazardous materials is a common extraordinary assumption because it is uncertain and could affect value.

Question 30Real Property Review Appraisal Practice

A reviewer is evaluating a report where the appraiser used a gross rent multiplier (GRM) derived from sales of properties that are not comparable to the subject. The reviewer should:

  1. Conclude that the income approach is invalid
  2. Recalculate the GRM using the same data
  3. Accept the GRM because it is a commonly used method
  4. Question the reliability of the GRM and its effect on the value conclusion Correct answer.

Explanation

The reviewer must assess the appropriateness of the data used in the appraisal. If the comparables for the GRM are not comparable, the resulting multiplier may not be reliable, and the reviewer should question its use and impact on the value.

Question 31Real Property Review Appraisal Practice

In reviewing a sales comparison approach, a reviewer finds that the appraiser made a large adjustment for market conditions but provided no support. The reviewer should:

  1. Assume the adjustment is based on the appraiser's experience
  2. Remove the adjustment and recalculate the value
  3. Accept the adjustment because market conditions are difficult to quantify
  4. Require the appraiser to provide support or consider the adjustment unsupported Correct answer.

Explanation

Adjustments in the sales comparison approach must be supported by market evidence. If the appraiser provides no support, the reviewer should question the adjustment and its impact on the value conclusion.

Question 32Real Property Review Appraisal Practice

When reviewing a cost approach, a reviewer should verify that the appraiser:

  1. Used the same depreciation method as other appraisers
  2. Considered all forms of depreciation and supported the estimates Correct answer.
  3. Applied the age-life method exclusively
  4. Included entrepreneurial incentive in all cases

Explanation

The cost approach requires the appraiser to consider physical deterioration, functional obsolescence, and external obsolescence, and to support the depreciation estimates. The reviewer should check that all forms of depreciation were addressed and supported.

Question 33Real Property Review Appraisal Practice

A reviewer is assessing whether the appraiser's highest and best use analysis is adequate. The reviewer should confirm that the analysis:

  1. Is based solely on the subject's zoning
  2. Relies on the client's intended use
  3. Considers only the current use
  4. Includes a market analysis and financial feasibility Correct answer.

Explanation

A proper highest and best use analysis must consider legal permissibility, physical possibility, financial feasibility, and maximum productivity. This requires market analysis and financial feasibility testing.

Question 34Real Property Review Appraisal Practice

In a review assignment, the reviewer's scope of work must be:

  1. Sufficient to produce credible assignment results Correct answer.
  2. Identical to the scope of work in the original appraisal
  3. Limited to a desk review of the report
  4. Determined by the client's instructions only

Explanation

The reviewer must determine an appropriate scope of work that is sufficient to produce credible assignment results. The scope may differ from the original appraisal and must consider the reviewer's own requirements.

Question 35Real Property Review Appraisal Practice

A reviewer finds that the appraiser's report includes a statement that the property is in compliance with the Americans with Disabilities Act (ADA). The reviewer should:

  1. Ignore the statement as it is not relevant to value
  2. Accept the statement because ADA compliance is a legal matter
  3. Verify the statement with a qualified professional
  4. Note that the appraiser may lack competency to make such a determination Correct answer.

Explanation

Appraisers are generally not qualified to determine legal compliance with ADA. The reviewer should recognize that such a statement may be outside the appraiser's competency and could require a hypothetical condition or extraordinary assumption.

Question 36Real Property Review Appraisal Practice

When a reviewer is evaluating the reconciliation in a report, the reviewer should focus on whether the appraiser:

  1. Selected the highest value indication
  2. Used all three approaches to value
  3. Averaged the values from all approaches
  4. Explained why the selected approach is most reliable Correct answer.

Explanation

Reconciliation requires the appraiser to weigh the approaches and explain why the selected approach is most reliable for the subject property. Simply averaging or selecting the highest value is not proper reconciliation.

Question 37Real Property Review Appraisal Practice

A reviewer is examining a report where the appraiser used a hypothetical condition that the property is vacant. The reviewer should:

  1. Require the appraiser to remove the hypothetical condition
  2. Determine if the hypothetical condition is necessary and disclose its effect Correct answer.
  3. Assume the property is actually vacant
  4. Accept the hypothetical condition without question

Explanation

The reviewer must assess whether the hypothetical condition is properly used and disclosed, and consider its impact on the value opinion. The reviewer should not simply accept or reject it without analysis.

Question 38Real Property Review Appraisal Practice

In reviewing a report, a reviewer notices that the appraiser's market analysis only covers the neighborhood and not the broader market. The reviewer should:

  1. Ignore the issue because market analysis is not required
  2. Consider the analysis adequate because neighborhood is most important
  3. Require the appraiser to expand the analysis to include regional and national trends
  4. Assess whether the limited analysis affects the credibility of the value conclusion Correct answer.

Explanation

The reviewer must determine if the market analysis is sufficient for the assignment. A limited analysis may still be adequate if it supports the value conclusion, but the reviewer must assess its impact on credibility.

Question 39Real Property Review Appraisal Practice

A reviewer is evaluating the appraiser's exposure time conclusion. The most appropriate basis for the reviewer's assessment is:

  1. The average exposure time from a national survey
  2. The appraiser's personal experience
  3. The client's desired marketing period
  4. Market data and trends for similar properties Correct answer.

Explanation

Exposure time must be based on market evidence for similar properties in the same market. The reviewer should evaluate whether the appraiser's conclusion is supported by market data.

Question 40Real Property Review Appraisal Practice

When a reviewer concludes that the value opinion in the report under review is not credible, the review report should:

  1. Recommend that the client obtain a second appraisal
  2. Explain the reasons for the lack of credibility and may include a new value opinion Correct answer.
  3. Simply state that the report is not credible without explanation
  4. State that the value is incorrect and provide a new value

Explanation

The review report must explain the reasons for the reviewer's conclusions. If the reviewer develops a new value opinion, it must be supported and reported in accordance with USPAP.

Question 41Real Property Review Appraisal Practice

A reviewer finds that the appraiser used a comparable sale that closed after the effective date of the appraisal. The reviewer should:

  1. Reject the sale because it is after the effective date
  2. Require the appraiser to use only sales before the effective date
  3. Accept the sale because it is the most recent
  4. Consider whether the sale was available in the market at the effective date Correct answer.

Explanation

A sale that closed after the effective date may still be relevant if it was under contract or otherwise known in the market at the effective date. The reviewer should assess whether the sale reflects market conditions as of the effective date.

Question 42Real Property Review Appraisal Practice

A reviewer is evaluating a report for a property that is proposed construction. The reviewer should confirm that the appraiser:

  1. Used only the cost approach
  2. Valued the property as if completed without any assumptions
  3. Analyzed the plans and specifications and used an extraordinary assumption Correct answer.
  4. Inspected the completed property

Explanation

For proposed construction, the appraiser must analyze plans and specifications and typically use an extraordinary assumption that the property will be completed as proposed. The reviewer should confirm this.

Question 43Real Property Review Appraisal Practice

In a review assignment, the use of a hypothetical condition by the reviewer is appropriate when:

  1. The appraiser used one in the original report
  2. The client requests it without justification
  3. The reviewer wants to test a different value scenario
  4. It is necessary for the review and properly disclosed Correct answer.

Explanation

A reviewer may use a hypothetical condition if it is necessary for the review and is clearly disclosed. It must be justified and not used to mislead.

Question 44Real Property Review Appraisal Practice

A reviewer is evaluating an appraiser's conclusion that the sales comparison approach is most reliable. The reviewer should:

  1. Verify that the appraiser considered the quality and quantity of data for each approach Correct answer.
  2. Assume the conclusion is correct if the appraiser is experienced
  3. Require the appraiser to use the income approach instead
  4. Accept the conclusion because sales comparison is always most reliable

Explanation

The reviewer must assess whether the appraiser's reconciliation is supported by the quality and quantity of data available for each approach. The most reliable approach depends on the property type and market conditions.

Question 45Real Property Review Appraisal Practice

When reviewing a report, a reviewer discovers that the appraiser did not analyze the effect of a recent environmental contamination in the area. The reviewer should:

  1. Conclude that the property is contaminated
  2. Require the appraiser to analyze the potential impact on value Correct answer.
  3. Assume the contamination does not affect the property
  4. Ignore the issue because environmental issues are not part of appraisal

Explanation

Environmental contamination can affect marketability and value. The appraiser must analyze its impact, and the reviewer should require such analysis if omitted.

Question 46Real Property Review Appraisal Practice

A reviewer is evaluating the appraiser's use of a discounted cash flow (DCF) analysis in an income approach. The reviewer should focus on:

  1. The appraiser's choice of software
  2. The length of the holding period only
  3. The appraiser's use of a terminal capitalization rate
  4. The appraiser's selection of discount rate and cash flow projections Correct answer.

Explanation

In a DCF analysis, the discount rate and cash flow projections are critical inputs that must be supported by market data. The reviewer should assess their reasonableness and impact on the value conclusion.

Question 47Real Property Review Appraisal Practice

A reviewer is assessing the credibility of an appraisal that relies heavily on comparable sales from a different market area. The reviewer should:

  1. Require the appraiser to adjust for market differences
  2. Reject the appraisal because the comparables are from a different area
  3. Consider whether the appraiser adequately analyzed and adjusted for market differences Correct answer.
  4. Accept the comparables if they are similar in physical characteristics

Explanation

Comparables from a different market area can be used if the appraiser analyzes and adjusts for differences in market conditions. The reviewer should assess the adequacy of those adjustments.

Question 48Real Property Review Appraisal Practice

In a review assignment, the reviewer's own report must contain sufficient information to allow a reader to understand the reviewer's scope of work, data, and reasoning. This requirement is best described as which review reporting principle?

  1. The review report may incorporate the original report by reference only
  2. The review report must be self-contained and supportable on its own terms Correct answer.
  3. The review report must reach the same value conclusion as the original
  4. The review report may omit the reviewer's reasoning if a value is stated

Explanation

Review reporting standards require the review report to stand alone, disclosing the scope of work, data analyzed, and reasoning so a reader can follow and support the reviewer's conclusions without relying on the original report. A review that merely references the original or omits reasoning fails this transparency principle.

Question 49Real Property Review Appraisal Practice

A reviewer is checking whether an appraiser's income approach properly developed a capitalization rate. The appraiser extracted an overall rate from comparable sales but applied it to the subject's actual net operating income that included non-recurring income. What is the reviewer's most appropriate concern?

  1. The appraiser should have used a gross income multiplier instead of a rate
  2. The capitalization rate must always be built up from the subject's own expenses
  3. The income being capitalized is inconsistent with the basis used to extract the rate Correct answer.
  4. The capitalization rate was extracted using the wrong band-of-investment formula

Explanation

An overall capitalization rate extracted from comparable sales reflects the income and expense assumptions embedded in those sales, typically stabilized recurring income. Applying that rate to income that includes non-recurring items mismatches the rate and the income stream, distorting the value indication. Consistency between the rate and the income capitalized is the governing principle.

Question 50Real Property Review Appraisal Practice

A reviewer is analyzing an appraiser's reconciliation and notes that the appraiser gave equal weight to the sales comparison and cost approaches even though the subject is an older, functionally obsolete special-purpose building with few comparable sales but reliable depreciated cost data. Which conclusion by the reviewer is most defensible?

  1. The weighting appears inconsistent with the relative reliability of the approaches for this property type Correct answer.
  2. The reconciliation should be rejected solely because the cost approach was used
  3. The sales comparison approach must always receive the greatest weight in any appraisal
  4. Equal weighting is acceptable because both approaches were developed and reported

Explanation

Reconciliation should reflect the relevance and reliability of each approach given the property's characteristics and the quality of available data. For an older, special-purpose, functionally obsolete property with thin sales data, depreciated cost evidence may deserve greater weight, so equal weighting warrants scrutiny. The reviewer evaluates the logic of the weighting, not merely that both approaches were completed.