$23.$ Suppose a borrower is doing a cash$-$out refinance to get as much money as they can out of

their primary residence property. Then you see on the appraisal report that the house was

listed for sale in the last $12$ months and was actually on the market for $6$ months but didn$$t

sell. Then you also noticed that the appraiser also marked the box that said property values in

the area were $$declining$.$ What should the loan processor and$/$or underwriter do now?

a$.$ They should alert the loan officer to talk to the borrower because most lenders will

not want to do a cash$-$out refinance on a property in this situation.

b$.$ They should tell the loan officer to talk to the borrower about seeking other

alternatives and perhaps talk to a Certified Financial Planner or CPA since almost no

lenders would be willing to entertain doing this loan.

c$.$ Both $$A$$ and $$B$$ are correct and proper steps to take.

d$.$ They should do nothing. Treat this loan as if it were $$business as usual.$$ Ram it

through the system and hope no one in the Secondary Market who buys this loan will

notice anything wrong.

$7$

$24.$ Suppose the entire appraisal report looks good and assume the appraiser made no

negative comments. Yet when we take a look at the photo of the subject property, we see a

large hole in the wall between the living room and the front yard. We don$$t understand what

happened, but what should we do next?

a$.$ Contact the appraiser to get a written addendum explaining this situation.

b$.$ Contact the California AQB and turn in the appraiser for negligence.

c$.$ Simply ask the appraiser to lower the value to compensate for the hole in the wall.

d$.$ Ask the appraiser to park their car in front of the house and take a new photo at a

different angle to hide the fact there is a hole in the wall.

$25.$ Suppose in the expensive city of Palo Alto $($California$)$ that a stick house built in $1910$

burns down and is a total loss. The remaining portion of the house was removed and now it is

an empty lot. Yet one year ago, the owner did hire a local appraiser to do a formal appraisal

report. That report used the sales comparable method and gave the property a value of $$2$

million. After the fire, the same appraiser using the Cost Approach Replacement method now

valued the empty lot at $$1\mathrm{.}9$ million. What is wrong here?

a$.$ Something is fishy. The building or house structure should always have a value

greater than the property.

b$.$ Nothing is wrong. Since Palo Alto has strict zooming restrictions that reduces the

supply of land, this is why even empty lots are sometimes worth more than the

structure that is located on the land. The $1910$ stick house itself was almost worthless.

c$.$ The appraiser is using the wrong method. Instead of using the Cost Replacement

Method they should be using the Sales Comparable method again like they did one

year ago.

d$.$ This appraiser is breaking a rule. Appraisers can$$t appraise the same house in any $12-$

month period