Compensation contingent on a subsequent event, such as a loan closing, is:
Correct Answer
A) Prohibited for appraisal assignments
Why this is correct: USPAP's Ethics Rule prohibits an appraiser from accepting an assignment that includes a contingency fee based on a subsequent event, such as a loan closing or a specific value conclusion. Such compensation creates an incentive to bias the appraisal. Why the other choices are wrong: Written client consent does not make a prohibited contingency fee permissible. Disclosure in the certification does not cure the violation; the arrangement itself is barred. It is not required for federally related transactions; it is prohibited. Exam tip: Any compensation contingent on a deal closing or value outcome is strictly prohibited.
Why This Is the Correct Answer
Why this is correct: USPAP's Ethics Rule prohibits an appraiser from accepting an assignment that includes a contingency fee based on a subsequent event, such as a loan closing or a specific value conclusion. Such compensation creates an incentive to bias the appraisal. Why the other choices are wrong: Written client consent does not make a prohibited contingency fee permissible. Disclosure in the certification does not cure the violation; the arrangement itself is barred. It is not required for federally related transactions; it is prohibited. Exam tip: Any compensation contingent on a deal closing or value outcome is strictly prohibited.
More USPAP Questions
Which type of appraisal report may contain the appraiser's analyses, opinions, and conclusions but is intended for use by the client only?
How long must an appraiser retain the workfile for an appraisal assignment under USPAP?
If an appraiser uses a hypothetical condition that the subject property is 10% larger than it actually is, this must be:
Under Standard 1, when developing a real property appraisal, an appraiser must:
An appraiser accepts an assignment to appraise a specialized industrial property but has never appraised this property type before. To comply with the Competency Rule, the appraiser:
According to the Scope of Work Rule, the scope of work must be appropriate to the:
According to Standard 1, when developing an opinion of market value, an appraiser must analyze:
A lender emails: 'We need at least $450,000 to make this loan work — can you take the assignment?' Accepting on that basis is:
An appraiser is developing an opinion of market value for a 20-unit apartment building. The appraiser finds three comparable sales with the following information: Sale 1: 18 units, sold for $1,800,000; Sale 2: 22 units, sold for $2,200,000; Sale 3: 24 units, sold for $2,280,000. What is the average price per unit for these comparables?
In developing a scope of work, an appraiser must consider all of the following factors EXCEPT:
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