Apply Appraisal Review Standards - Nationwide Multistate Licensing System NMLS

What is the primary review concern when comparable sales are all from one subdivision but subject is outside it?

Potential market mismatch; requires support that areas are truly comparable. Comparables from different areas may not reflect the subject's market, requiring justification for relevance.
What is the key review step when an appraisal is subject to repairs or inspections?

Confirm condition-to requirements and required completion/recertification. Subject-to appraisals require verification of completion to ensure the value reflects the property's final state.
Which option is a red flag in the cost approach for a newer home?

Cost approach omitted or poorly supported when it should be applicable. For newer properties, the cost approach provides a reliable value indicator and should be properly developed.
What is the primary compliance concern if a loan officer selects the appraiser directly?

Potential independence violation and undue influence risk. Direct selection by loan officers violates independence rules designed to prevent pressure on appraisers.
Identify the red flag: the appraiser used comparable sales from a different market with no explanation.

Unsupported comparable selection; requires market/adjustment justification. Comparables must be relevant to the subject property's market, with any deviations justified to support credible valuation.
Which item is a red flag for property condition: photos do not match the stated quality/condition?

Condition/quality mismatch between photos and narrative ratings. Discrepancies between visual evidence and descriptions indicate potential inaccuracies in assessing property value.
Identify the red flag: the appraiser's reconciliation selects a value with no narrative support.

Unsupported reconciliation; requires explanation of weighting and logic. Reconciliation must explain how the final value was derived from the approaches to ensure logical consistency.
Identify the red flag: the appraisal report has internal inconsistencies (GLA differs across pages).

Material inconsistency; requires correction and reconciliation. Internal inconsistencies undermine the appraisal's reliability and must be resolved for accurate valuation.
What is the main review concern if the appraiser uses MLS listings as primary value support?

Listings are not closed sales; require proper support and reconciliation. Listings represent potential rather than actual sales, so they need supplemental closed sales for reliable valuation.
Identify the red flag: the appraiser reports $0$ for site value with no explanation.

Unsupported site value conclusion; requires rationale or correction. Site value must be estimated and justified as it contributes to the overall property valuation in the cost approach.
Which option is the best red flag indicator of possible appraisal fraud in comps?

Non-arm's-length or related-party comparables not disclosed/analyzed. Non-arm's-length transactions may indicate manipulation and require disclosure to assess true market value.
What is the primary purpose of an appraisal review in mortgage lending?

Confirm the appraisal is credible, compliant, and supports value conclusion. Ensures the appraisal meets regulatory standards and provides a reliable basis for lending decisions by verifying its quality and conclusions.
What is a common red flag in the sales comparison approach regarding adjustments?

Large or unexplained adjustments that are not market-supported. Adjustments in the sales comparison approach must be derived from market data to accurately reflect value differences.
What is the reviewer's key check for highest and best use in a typical owner-occupied SFR?

It is legally permissible, physically possible, and financially feasible as improved. Highest and best use analysis verifies the property's optimal utilization supports the value conclusion.
Identify the red flag: the appraiser assumes zoning compliance but provides no zoning data source.

Unsupported zoning conclusion; requires verification/source citation. Zoning compliance must be verified with reliable sources to ensure the appraisal reflects legal property use.
Which federal rule requires appraisers to be independent from loan production influence?

Appraiser Independence Requirements (AIR) under TILA/Reg Z. AIR mandates separation to prevent bias and ensure objective valuation in mortgage transactions.
What is the correct reviewer response if the appraisal indicates an illegal property use?

Escalate and require resolution; value must reflect legal use or documented cure. Illegal uses invalidate the value opinion, necessitating resolution to comply with legal and lending standards.
Identify the red flag: a comparable sale is older than typical market activity and not justified.

Stale comparables without support; indicates weak market data selection. Comparables should reflect current market conditions, and older sales need justification to ensure relevance.
Identify the red flag: the appraiser's market conditions show declining prices but no time adjustments.

Inconsistent market trends; missing or unsupported time adjustments. Market trends must be consistently applied through adjustments to reflect accurate value changes over time.
What is the minimum USPAP requirement for a reviewer when developing an appraisal review?

Comply with USPAP Standards Rule 3 (Appraisal Review). USPAP Standard 3 establishes ethical and performance standards for developing credible appraisal review opinions.
Which document sets baseline appraisal content expectations for most 1–4 unit loans?

Uniform Residential Appraisal Report (URAR) and agency guidelines. The URAR form, aligned with GSE guidelines, standardizes required data and analysis for residential appraisals.
What is the key difference between an appraisal review and a second appraisal?

Review evaluates the original; second appraisal develops a new opinion. A review assesses the quality and compliance of an existing appraisal, whereas a second appraisal independently estimates value.
Which option best describes an unacceptable appraisal practice: valuing to a target price?

Predetermined value conclusion (value shopping/targeting). Appraisals must develop independent value opinions without predetermined targets to maintain credibility and compliance.
Identify the red flag: the appraiser omits adverse external influences noted in neighborhood description.

Failure to analyze location/external obsolescence affecting value. External factors must be analyzed as they can diminish property value and affect overall appraisal credibility.
What is the most appropriate reviewer action when a material error is found in the appraisal?

Request appraiser correction/clarification or order a new appraisal if needed. Reviewers must ensure errors are addressed to maintain the appraisal's integrity and support lending decisions.

Study these flashcards