During intake, the person preparing the valuation would be paid more if the value is higher. What is the best compliant response?
Correct Answer
A) Remove the value-based compensation conflict
Why this is correct: Regulation Z (12 CFR 1026.42(d)) prohibits compensating a person who prepares a valuation based on the property value assigned, as this creates a conflict of interest. The compliant action is to eliminate this conflict before the valuation is relied upon, which means removing the value-based compensation structure. Why the other choices are wrong: "Order a second appraisal solely because the first value was too low" is prohibited coercion under appraisal independence rules. "Withhold the valuation copy until closing if the applicant does not ask" violates the requirement to provide a copy promptly upon completion or at least three days before closing. "Remove unfavorable valuation comments before giving the report to the applicant" is fraudulent alteration of a report. Exam tip: Any compensation tied to value is a red flag. The only compliant action is to remove that conflict.
Why This Is the Correct Answer
The correct response is "Remove the value-based compensation conflict". Valuation compensation cannot depend on the value assigned, and conflicts must be addressed before reliance.
Why the Other Options Are Wrong
Option B: Order a second appraisal solely because the first value was too low.
This choice is a tempting shortcut, but it conflicts with appraisal and valuation independence because the file still needs the required documentation, timing, or rule-based review before the action is taken.
Option C: Withhold the valuation copy until closing if the applicant does not ask.
This choice is not the best answer because it applies the wrong file step for appraisal and valuation independence; the governing rule is tested by the correct option.
Option D: Remove unfavorable valuation comments before giving the report to the applicant.
This choice is not the best answer because it applies the wrong file step for appraisal and valuation independence; the governing rule is tested by the correct option.
Memory Technique
Appraiser pay tied to value is not acceptable.
Exam Tip
For appraisal and valuation independence questions, separate the required file step from plausible sales, timing, or documentation shortcuts.
Common Mistakes to Avoid
- -Borrower consent does not cure a valuation independence conflict.
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