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P4-108 Quiz

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Question 1 of 12

1. Question

What best describes an appraisal in a mortgage transaction?

A lender’s estimate of replacement cost
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A homeowner’s opinion of value
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An unbiased professional opinion of the value of a home
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A credit report used to price the loan
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Question 2 of 12

2. Question

When is an appraisal typically used?

Only when a property is rented
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Whenever a mortgage is involved in buying, refinancing, or selling the property
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Only for cash purchases
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Only for FHA loans
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Question 3 of 12

3. Question

Why does a lender require an appraisal when a property is pledged as collateral?

To confirm the borrower’s employment
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To verify the borrower’s credit score
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To establish the fair market value and identify negative factors affecting value
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To determine the interest rate
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Question 4 of 12

4. Question

What is a key purpose of appraisals in underwriting?

To predict future appreciation
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To set HOA dues
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To provide a professional opinion of value for mortgage-related transactions
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To confirm title is clear
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Question 5 of 12

5. Question

What is the Market Approach primarily based on?

Borrower income and expenses
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Recent sales of similar properties
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Construction costs minus depreciation only
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Rent collected divided by cap rate
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Question 6 of 12

6. Question

Within what distance does the Market Approach typically study comparable sales?

Within 5 miles
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Within the same county
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Within a one-mile radius
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Within the same school district
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Question 7 of 12

7. Question

What does the Market Approach do after reviewing comparable sales?

Applies an interest-rate adjustment
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Ignores differences if the property is newer
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Makes adjustments for differences between the properties
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Uses NOI divided by the capitalization rate
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Question 8 of 12

8. Question

Which factor may require adjustments in the Market Approach?

Borrower’s debt-to-income ratio
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Square footage, age/location, or amenities
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Lender underwriting overlays
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Mortgage insurance premium
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Question 9 of 12

9. Question

What is the Income Approach used for?

Estimating property value based on income the property generates
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Estimating value based on replacement cost
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Estimating value using comparable sales only
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Estimating value using borrower income
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Question 10 of 12

10. Question

When is the Cost Approach typically used?

For condominium resales
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For investment properties only
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For older homes with major depreciation
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For new construction properties
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Question 11 of 12

11. Question

What is the core idea behind the Cost Approach?

Value equals NOI divided by cap rate
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Value equals the lowest sale within a mile
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Value equals the borrower’s purchase contract price
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Value should equal the cost to build an equivalent building
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Question 12 of 12

12. Question

In the Cost Approach, the market price for the property equals:

Cost of land plus cost of construction, less depreciation
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NOI divided by cap rate
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Comparable sales average plus adjustments
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Contract price plus closing costs
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