Which of the following represents a violation of appraiser independence under the Dodd-Frank Act provisions?
Correct Answer
A) A loan officer asking for comparables to hit the price
Why this is correct: Asking an appraiser to use specific comparables to 'hit' a predetermined price is a clear example of attempting to influence value, which violates the independence safeguards under Dodd-Frank. Why the other choices are wrong: Requesting rush delivery for a fee is a business term negotiation. Specifying a report format is a client requirement. An AMC selecting from its panel is a standard procurement practice. Exam tip: Any request implying a predetermined value target is a red flag for independence violations.
Why This Is the Correct Answer
CORRECT_ANSWER - Option C represents a clear violation because the loan officer is asking the appraiser to find comparables specifically to support the contract price, which is a predetermined value. This constitutes inappropriate influence on the appraiser's independent professional judgment. The request implies that the current analysis doesn't support the contract price and asks the appraiser to find data to justify a specific outcome. This type of pressure to reach a predetermined conclusion is exactly what Dodd-Frank independence provisions were designed to prevent.
Why the Other Options Are Wrong
VALUE PRESSURE Test
V-alue specific requests, A-sking for predetermined outcomes, L-eading toward contract price, U-ndue influence on conclusions, E-xpectations of specific results = PRESSURE that violates independence. Administrative matters (timing, format, additional data without value direction) = OK.
How to use: When evaluating potential independence violations, ask: 'Is this request trying to influence my VALUE conclusion or is it purely administrative?' If it mentions supporting a specific price or suggests a desired outcome, it's likely a violation.
Exam Tip
Look for key phrases like 'support the contract price,' 'make the deal work,' or 'consider additional comparables to justify' - these indicate value pressure and independence violations.
Common Mistakes to Avoid
- -Thinking all requests for additional comparables are violations
- -Confusing administrative requirements with value influence
- -Not recognizing subtle pressure tactics that reference contract prices or deal requirements
Concept Deep Dive
Analysis
The Dodd-Frank Act established strict appraiser independence requirements to prevent the influence and pressure that contributed to the 2008 financial crisis. These provisions prohibit any attempts to influence an appraiser's professional judgment or predetermined value conclusions. The key distinction is between legitimate administrative requests (formatting, timing, additional data) versus attempts to influence the appraiser's valuation conclusion. Any communication that suggests a desired outcome or asks the appraiser to support a specific value violates independence requirements.
Background Knowledge
The Dodd-Frank Act's appraiser independence provisions were enacted in response to widespread appraisal pressure during the mortgage crisis. These rules prohibit any attempts to influence appraisers to reach predetermined values while allowing legitimate administrative communications. Understanding the difference between administrative requests and value influence is crucial for compliance.
Real-World Application
In practice, appraisers regularly receive requests for additional comparables or analysis, which is acceptable. However, when these requests are tied to supporting a specific value or making a transaction work, they cross the line into prohibited influence. Appraisers must document any inappropriate pressure and may need to withdraw from assignments where independence is compromised.
More USPAP Questions
An appraiser is analyzing three comparable sales with the following data: Sale 1: $350,000 with +$10,000 adjustments; Sale 2: $340,000 with -$5,000 adjustments; Sale 3: $360,000 with -$15,000 adjustments. What are the adjusted sale prices?
A lender orders an appraisal for a $300,000 residential loan. After receiving the appraisal, the loan officer contacts the appraiser requesting that certain language be changed to better support the loan approval. This scenario represents a violation of:
How often must appraisers complete continuing education to maintain their license or certification?
Under FIRREA, which federal agency was given the authority to set minimum standards for real estate appraisers performing appraisals in federally related transactions?
How often must licensed and certified appraisers complete continuing education to maintain their credentials according to AQB requirements?
FIRREA was enacted primarily in response to which financial crisis?
In a narrative appraisal report, which section would typically contain the appraiser's analysis of highest and best use?
A narrative appraisal report for a commercial property must include detailed analysis of income, expenses, and capitalization rates. This level of detail is primarily required because:
Under the Dodd-Frank Act, which entity is responsible for establishing appraisal standards for federally related transactions?
In the URAR form, what does the appraiser indicate in the 'Subject' column for site size?
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